A bank's assets consist of $500,000 in total reserves, $1,600,000 in loans, and a building worth $1,200,000 . Its liabilities and capital consist of $2,000,000 in demand deposits and $1,300,000 in capital. If the required reserve ratio is 10 percent, what is the level of the bank's excess reserves? How much could it loan out as a result?
a. $200,000; $200,000
b. $200,000; $2,000,000
c. $300,000; $300,000
d. $300,000; $3,000,000
c
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a. 0% b. 1.8% c. 2.0% d. 2.2%
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A. 9.5 B. 7.5 C. 5.5 D. 3.5
Classical economists believed that
A. if saving exceeded investment, prices and interest rates would rise as business accumulated unwanted inventories. B. flexible prices and wages could not restore an economy to full employment if the interest rate were rigid. C. flexible interest rates, wages, and prices would assure full employment. D. voluntary unemployment reflected economic inefficiency.