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- Subject
- Money, Interest Rates And Outputeconomics-mcqs › money-interest-rates-and-output
- Published
- 31 May 2019
- Last updated
- 28 May 2026
If all banks hold a 100% reserve ratio, what happens to the money supply when a person deposits Rs 1,000 in a bank?
Multiple choice question for Money, Interest Rates And Output. Select an option, then review the explanation below.
Explanation
When banks maintain a full 100% reserve ratio, depositing currency into a bank does not lead to any change in the overall money supply. This is because banks do not lend out deposits, so the total money in circulation stays the same.
More Money, Interest Rates And Output MCQs
Practice related questions from the same subject.
- 1.How does a decrease in interest rates affect the monetary base, consumer credit availability, and the cost of consumer credit?
- 2.Which variable do central banks typically set directly, and which variable adjusts as a consequence?
- 3.What is it called when the central bank purchases financial assets in the open market to expand the monetary base?
- 4.M4 is considered a __________ monetary aggregate and encompasses deposits held at both __________ and __________?
- 5.Assuming all other factors remain constant, what happens to the quantity of real money holdings when interest rates increase?