If Excess Reserves Are Too Large,a Bank Is Likely to

question 122

Multiple Choice

If excess reserves are too large,a bank is likely to

• A)Buy government securities.
• B)Borrow in the federal funds market.
• C)Borrow reserves from the discount window.
• D)All of the choices are correct.

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Definitions:

Estimate

An approximate calculation or judgment of the value, number, quantity, or extent of something, often used in planning and decision-making.

Balance Sheet Approach

A method used to calculate the amount required in the Allowance for Doubtful Accounts to cover expected uncollectibles. This method is based on the Accounts Receivable amount and the aging process. The adjustment to the Allowance for Doubtful Accounts will bring the new balance of that account to the new required level.

Bad Debts Expense

The portion of receivables that a company does not expect to collect and writes off as a loss.

Gross Accounts Receivable

The total amount owed to a company by its customers for goods or services sold on credit before any deductions for returns or allowances.