Table 9-6: Deposit Expansion Stages

question 197

Multiple Choice

Table 9-6: Deposit Expansion Stages
In Table 9-6, assume that banks loan out 100% of their excess banking reserves, there are no cash withdrawals, and all loan proceeds are spent. Figures have been rounded up to the nearest whole number.
-Refer to Table 9-6. New loans made in Stage 1($C) amount to

• A) $100.
• B) $200.
• C) $600.
• D) $800.

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Definitions:

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.

Sales Mix

The relative proportion of different products or services sold by a company, significantly influencing its overall profitability.

Existing Sales

The volume or amount of sales that a company has already achieved within a specific period, prior to any new sales efforts or campaigns.