Fractional Reserve Banking
In fractional reserve banking, banks lend out more money than they keep in reserve in the vault. For example, a bank that has $50 million in deposits, it can lend out up to $50 million, and hold zero in cash reserves. In reality, banks are required to hold a minimum level of reserves, so they will never lend out all deposits, but still they can lend more than they hold in reserves.
You might also like to view...
Nations with slower growth rates can "catch up" to rapidly growing countries by
A) using budget deficits as a long-run policy tool. B) adopting the technologies of the wealthier nations. C) pressuring the central bank to increase the money supply and reduce interest rates. D) raising the minimum wage. E) exporting more than it imports.
Which of the following economists believed that the factory owner, by paying his workers meager wages, was able to use this surplus to buy more capital goods?
A. Adam Smith B. Thorstein Veblen C. Milton Friedman D. Karl Marx
Suppose Bart's MRS for sodas with chips is 6 bags of chips per soda. Also assume that Lisa's MRS for sodas with chips is 8 bags of chips per soda. Assuming that these rates of substitution don't depend on the amounts consumed, which of the following trades would make Bart and Lisa better off?
A. Bart gives Lisa 9 bags of chips in exchange for a soda. B. Bart gives Lisa 7 bags of chips in exchange for a soda. C. Bart gives Lisa 6 bags of chips in exchange for a soda. D. None of these trades is mutually beneficial.
Suppose that a state installs a toll booth on a highway and requires drivers to pay $1.00 before entering the highway. Installation of the toll booth changes:
A. a nonexcludable good into an excludable good. B. a nonrival good into a rival good. C. public good into a private good. D. a nonrival good into a nonexcludable good.