A Bank Has a Reserve Requirement of 0

question 54

Multiple Choice

A bank has a reserve requirement of 0.10. If it has demand deposits of $100,000 and is holding $12,000 in reserves:

• A)all the bank's reserves are excess reserves.
• B)the bank is not meeting its reserve requirement.
• C)the bank is holding $2,000 in excess reserves.
• D)all reserves are required reserves.

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Definitions:

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers for sales made on credit.

Charge Customer

The process of recording or billing a customer for goods sold or services rendered, reflecting an obligation for payment.

Acid Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with quick assets, such as cash, marketable securities, and accounts receivable, without selling inventory.

Acid Test Ratio

A financial metric that measures a company's ability to pay off its current liabilities with its quick assets (cash, marketable securities, and receivables).