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Practice Questions
Test your understanding with targeted questions related to the topic.
Question 1
Easy
What is credit creation?
💡 Hint: Think about how banks use deposits.
Question 2
Easy
What percentage of deposits do banks need to hold as reserves?
💡 Hint: It varies based on central bank regulations.
Practice 4 more questions and get performance evaluation
Interactive Quizzes
Engage in quick quizzes to reinforce what you've learned and check your comprehension.
Question 1
What happens to the money that banks do not keep in reserve?
- It is invested
- It is lent out
- It is stored in cash
💡 Hint: Consider the primary function of banks with deposits.
Question 2
True or False: The reserve requirement limits the total amount of loans a bank can issue.
- True
- False
💡 Hint: Reflect on how much banks must keep versus what they can lend.
Solve and get performance evaluation
Challenge Problems
Push your limits with challenges.
Question 1
A bank with an initial deposit of $10,000 has a reserve requirement of 15%. If the bank loans out $8,500, calculate the total money supply after three rounds of lending assuming all loans are redeposited.
💡 Hint: Visualize the lending process and calculate each round clearly.
Question 2
Discuss how changing the reserve requirement impacts inflation rates and economic stability.
💡 Hint: Think about how banks respond to reserve changes and their wider economic implications.
Challenge and get performance evaluation