Given a 25 percent reserve ratio, assume the commercial banking system is loaned up. Now assume the reserve ratio is reduced to 20 percent. As a result of this reduction:
A. we can expect bank lending and bank profits to decline.
B. each dollar of bank reserves will now support a maximum of $5 of checkable deposits.
C. the banking system must now reduce outstanding loans by 5 percent.
D. the banking system can now increase lending by 5 percent.
B. each dollar of bank reserves will now support a maximum of $5 of checkable deposits.
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Economists typically measure efficiency using
a. the price paid by buyers. b. the quantity supplied by sellers. c. total surplus. d. profits to firms.
Contractionary monetary policy
a. leads to disinflation and makes the short-run Phillips curve shift right. b. leads to disinflation and makes the short-run Phillips curve shift left. c. does not lead to disinflation but makes the short-run Phillips curve shift right. d. does not lead to disinflation but makes the short-run Phillips curve shift left.