Fractional reserve banking is a system in which
A) depository institutions pay a fraction of advertised interest rates.
B) a fraction of banking services must be provided by depository institutions.
C) depository institutions hold a fraction of total deposits in reserve.
D) the money supply is a set fraction of the U.S. gold reserves.
Answer: C) depository institutions hold a fraction of total deposits in reserve.
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To calculate GDP it is necessary to
A) add the total amounts of all the goods produced. B) use production cost to place a dollar value on all goods produced. C) average the cost of producing a good with the price of the good to place a dollar value on all goods produced. D) use the market price to place a dollar value on each good produced. E) use the average market price over the last five years to place a dollar value on all goods produced.
Some economists who use the public choice model to explain the ways government intervenes in the economy believe that regulatory capture results when an agency or commission is given authority over a particular industry or product
Which of the following is the best example of regulatory capture? A) A federal government agency hires more employees than it requires to regulate an industry because it does not seek to minimize costs or maximize the agency's profits. B) The head of an agency is required to testify before Congress because Congress controls the size of the agency's budget. Congress "captures" the agency because of its budget authority. C) The Food and Drug Administration (FDA) has increased the time and expense pharmaceutical firms incur to receive approval to market a new drug. D) Firms that were regulated by the Interstate Commerce Commission (ICC) attempted for many years to influence the ICC's actions.