Suppose a commercial banking system has $240,000 of outstanding checkable deposits and actual reserves of $85,000. If the reserve ratio is 25 percent, the banking system can expand the supply of money by a maximum of:
A. $75,000.
B. $5000.
C. $25,000.
D. $100,000.
Answer: D
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Retained earnings are always sufficient to finance a firm's rapid expansion in a high-growth economy
Indicate whether the statement is true or false
Suppose that the interest rate paid to savers increases. As a result, Tom wishes to save less. This suggests that, for Tom,
A) the substitution effect is greater than the income effect. B) the income effect is greater than the substitution effect. C) utility maximization is not occurring. D) future consumption is a luxury.
If a firm wished to maximize total revenues it should produce where
a. marginal cost is zero. b. marginal revenue is zero. c. marginal revenue is equal to marginal cost. d. marginal revenue is equal to price.
Which of the following is incorrect?
A. As the American average price level rises, American goods become relatively more expensive so that our exports fall and our imports rise. B. As the average price level falls, the interest rate declines, and interest-rate sensitive spending increases. C. When the average price level increases, real balances increase, businesses and households find themselves wealthier and therefore increase their spending. D. An increase in aggregate supply tends to increase real domestic output and reduce the average price level.