Practice - The Process of Credit Creation
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Practice Questions
Test your understanding with targeted questions
What is the reserve requirement?
💡 Hint: Think about how banks manage deposits and withdrawals.
What happens to the excess reserves in a bank?
💡 Hint: Consider the bank's role in the economy.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What percentage must banks keep as reserves?
💡 Hint: Think about the flexibility of different banking systems.
True or False: A bank can lend out all of its deposits without retaining any reserves.
💡 Hint: Reflect on the regulating rules governing banks.
1 more question available
Challenge Problems
Push your limits with advanced challenges
Suppose a bank has a reserve requirement of 20%. A customer deposits $1,000. How much can the bank lend out, and what will happen to the money after lending?
💡 Hint: Calculate the reserve first and consider the cycle of spending.
Discuss the potential long-term effects on the economy if all banks lowered their reserve requirement to 5%.
💡 Hint: Consider both positive (growth) and negative (inflation risk) outcomes.
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