Assume That When $100 of New Reserves Enter the Banking

question 31

True/False

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $625. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $500, then at that same point in time, loans for all banks amount to $2,625.

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Definitions:

Power Differential Heuristic

A mental shortcut used in decision-making that accounts for the imbalance of power in relationships or situations.

Blue Uniforms

Clothing of a blue color worn by members of certain professions, commonly associated with law enforcement or military personnel.

Anchoring with Adjustment Heuristic

A cognitive bias in decision-making where an initial value (the "anchor") heavily influences subsequent judgments and adjustments.

Temporizing Heuristic

A cognitive strategy involving delaying decision making until more evidence or information is available.