Suppose a Bank Has $100 Million in Checking Account Deposits

question 219

Multiple Choice

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent.If the Federal Reserve raises the required reserve ratio to 15 percent,then the bank will now have excess reserves of

• A)$0.
• B)-$5 million.
• C)$5 million.
• D)$15 million.

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Definitions:

Accounts Payable

The amount of money a company owes its suppliers for goods and services purchased on credit.

Accounts Receivable

Financial dues from customers to a firm for goods or services that have been dispensed or availed but remain unpaid.

Inventory

An accounting term referring to goods and materials held by a business for the purpose of sale or production.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.