1. Banks are required by law to keep a fraction of their deposits as _________. 2. When reserves do not pay interest, banks prefer to keep reserves rather than make loans. _________ (True/ False)...

1. Banks are required by law to keep a fraction of their deposits as _________.

2. When reserves do not pay interest, banks prefer to keep reserves rather than make loans. _________ (True/ False) (Related to Application 2 on page 308.)

3. If the reserve ratio is 0.3 and a deposit of $500 is made into a bank, the bank can lend out _________.

4. If the simplified money multiplier is 4, the reserve ratio is _________.