The Following Is Information About a Banking System: New Currency

question 154

Multiple Choice

The following is information about a banking system: New currency deposited in the system = $40 billion; desired reserve ratio = 20%;
Excess reserves prior to the currency deposit = $0.Refer to the above information.The $40 billion deposit of currency into chequing accounts will create excess reserves of:

• A)$20 billion.
• B)$32 billion.
• C)$40 billion.
• D)$0.

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Definitions:

Times-Interest-Earned Ratio

A fiscal indicator that evaluates a firm's capacity to satisfy its debt commitments utilizing its present income.

Operating Costs

Expenditures that are necessary for the day-to-day operations of a business, including costs related to manufacturing, sales, and administration.

Interest Charges

Interest charges are the costs incurred by an entity for borrowing money, quantified as a percentage of the principal loan amount.

Assets

Economic resources or owned items of value that an individual, corporation, or country possesses, expected to provide future benefits.