Commercial Banks Hold a Fraction of Their Deposits in Cash

question 60

Multiple Choice

Commercial banks hold a fraction of their deposits in cash in their vaults (or as deposits with the central bank) . This fraction is known as

• A)the excess reserve ratio.
• B)the required reserve.
• C)the reserve ratio.
• D)the fractional reserve.
• E)the target reserve.

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Definitions:

Owners' Equity

Owners' equity, similar to stockholders' equity, is the proportion of a company's total value that belongs to its owners or shareholders, reflecting the net assets after liabilities have been deducted.

Accounts Receivable

Funds that a business is due to receive from its clients for products supplied or services rendered, but which have not been paid for yet.

Capital Balances

The amount of money that owners have invested in a company, plus any retained earnings or minus any losses.

Partnership

An authorized business setup in which a group of individuals jointly manage the operation and distribution of profits.