Suppose a bank has $1,500,000 in deposits and the desired reserve ratio is 12 percent. If the bank is currently holding $200,000 in reserves, the excess reserves are equal to
A) zero.
B) $180,000.
C) $120,000.
D) $20,000.
D
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If a tax is imposed in a market in which demand is perfectly inelastic
A) the buyers pay the entire tax. B) the sellers pay the entire tax. C) the buyers and the sellers both pay a portion of the tax. D) neither the buyer nor the seller pays the tax.
The collapse of the subprime mortgage market
A) did not affect the corporate bond market. B) increased the perceived riskiness of Treasury securities. C) reduced the Baa-Aaa spread. D) increased the Baa-Aaa spread.
What is one reason car insurance seems much cheaper than health insurance?
A) Health insurance entails more idiosyncratic than systematic risk, and therefore the gains to diversification are more dramatic. B) Car insurance entails more systematic than idiosyncratic risk, and therefore the gains to diversification are more dramatic. C) Health insurance entails more systematic than idiosyncratic risk, and therefore there are fewer gains to diversification. D) Health insurance is manipulated through market power, and car insurance is not.
What is the Coase Theorem? What are transaction costs?