If the Total Deposits of the Banking System Are $400

question 185

Multiple Choice

If the total deposits of the banking system are $400 billion, how much money could these reserves support if the required reserve ratio is 0.20 and banks hold no excess reserves?

• A)$400 billion
• B)$1,200 billion
• C)$1,600 billion
• D)$2,000 billion

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Definitions:

Capital

Financial assets or the financial value of assets, such as cash and goods, used by a business to generate income.

Stockholders

People or organizations holding one or more shares in a corporation, thereby having partial ownership of the business.

Legal Capital

The minimum amount of capital that a company is required to maintain by law, often used to protect creditors and shareholders.

Financial Loss

A decrease in net income that results from operating activities, investments, and changes in fair value of assets, exceeding the income from these activities.