You Withdraw $2,000 from Your Account

question 340

Multiple Choice

You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This transaction, by itself, will directly reduce

• A) the quantity of money by $2,000.
• B) deposits by $2,000.
• C) the quantity of money by $1,600.
• D) deposits by $1,600.

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Definitions:

Cash Dividends

Payments made by a corporation to its shareholder members. It is the share of profits distributed in cash.

Borrower's Creditworthiness

An assessment of a borrower's ability to repay their debts on time, often considered by lenders before issuing a loan.

Commercial Lending

The practice of lending money to businesses for various purposes such as operations, expansion, or capital equipment purchases.

Current Ratio

A liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.