A Single Bank with $10,000 of Reserves and a Reserve

question 11

Multiple Choice

A single bank with $10,000 of reserves and a reserve ratio of 25 percent could support total transactions account balances of at most

• A)$10,000.
• B)$5,000.
• C)$40,000.
• D)$25,000.

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Definitions:

Plant Assets

Tangible assets that are used in the operations of a business and are not intended for resale, including buildings, machinery, and equipment.

Natural Business Year

The fiscal year that ends when a business's activities have reached the lowest point in its annual operating cycle, theoretically the most optimal time for financial reporting.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate years.

Contra Account

An account used in accounting to offset or reduce the balance of a related principal account.