If the Reserve Ratio Is 12

question 23

Multiple Choice

If the reserve ratio is 12.5 percent,then $1,000 of additional reserves can create up to

• A)$7,000 of new money.
• B)$8,000 of new money.
• C)$11,500 of new money.
• D)$12,500 of new money.

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Definitions:

Insolvent

A financial condition where liabilities exceed assets, rendering an entity incapable of meeting its financial obligations.

Owe Money

The condition of being under obligation to pay or repay someone or something in return for something received.

Chapter 7

A provision under the U.S. Bankruptcy Code that deals with the process of liquidation, where an individual's or company's assets are sold to pay off creditors.

Trustee

An individual or organization appointed to manage and administer property or assets on behalf of others, usually within a trust.