The Basic Reason Why the Chartered Banking System Can Increase

question 66

Multiple Choice

The basic reason why the chartered banking system can increase its demand deposits by a multiple of its excess reserves is that:

• A)reserves lost by any particular bank will be gained by some other bank.
• B)the central banks follow policies that prevent reserves from falling below the level required by law.
• C)the MPC of borrowers is greater than zero, but less than 1.
• D)the banking system must keep reserves equal to 100 percent of its demand-deposit liabilities.

---

Definitions:

SEM

Standard Error of the Mean, a statistic that measures the precision with which the sample mean represents the population mean.

Path Analysis

A specialized kind of regression analysis used in structural equation modeling to describe the directed dependencies among a set of variables.

Factor Analysis

A technique utilized to identify underlying relationships between measured variables through the analysis of linear combinations.

Regression

A statistical method used to analyze the relationship between a dependent variable and one or more independent variables.