If a Bank Uses $500 of Excess Reserves to Make

question 163

Multiple Choice

If a bank uses $500 of excess reserves to make a new loan when the reserve ratio is 20 percent, what happens to the money supply in the very short term?

• A) It decreases by $500.
• B) It increases by $100.
• C) It decreases by $100.
• D) It increases by $500.

Learn about inventory costs and opportunity costs associated with holding inventory.

Understand the impact of credit policies on the cash cycle and operating cycle of a business.

Comprehend the terms of sale and the effects of credit policy decisions on a firm’s financials, including net present value calculations.

Understand sophisticated credit evaluation techniques like Multiple Discriminant Analysis (MDA) and their application.

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