First Safety, a commercial bank, has $6,000,000 of outstanding demand deposits and actual reserves of $1,700,000 . If the reserve ratio is 25 percent, what is the maximum amount of new loans the bank can extend?

a. $100,000
b. $425,000
c. $200,000
d. $1,500,000


c

Economics

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When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is TRUE?

A) Voluntary agreements usually do not work since the owner has no incentive to negotiate. B) Transactions costs must be low relative to the expected benefits of reaching an agreement. C) Voluntary agreements are difficult to negotiate because they usually involve government intervention. D) Voluntary agreements always leave the owner worse off.

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The basic purpose of imposing legal reserve requirements on commercial banks is to:

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Economics