Suppose All Banks Are Subject to a Uniform Reserve Requirement

question 125

Multiple Choice

Suppose all banks are subject to a uniform reserve requirement of 20 percent and that the Union Bank has no excess reserves. If a new customer deposits $50,000, the bank could extend new loans up to a maximum of

• A) $10,000.
• B) $40,000.
• C) $50,000.
• D) $250,000.

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Definitions:

Pegboard System

An accounting system that uses a board with pegs to track the financial transactions and balances of a business.

Quarterly Amounts

Financial figures or sums calculated or reported every three months within a fiscal year.

Government Agencies

Organizations or bodies formed by a government to enact policies, enforce laws, and manage public sector activities.

Credit Balance

The amount of money in a financial account that the account holder can claim, representing a surplus of payments over charges.