Use the Following Example to Answer the Following Questions

question 64

Multiple Choice

Use the following example to answer the following questions:
Imagine that Stella deposits $25,000 in currency (which she had been storing in her closet) into her checking account at the bank.Assume that this institution has a required reserve ratio of 25 percent.
-As a result of this deposit,by how much will the bank's required reserves increase?

• A) $0
• B) $6,250
• C) $25,000
• D) $31,250
• E) $100,000

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Definitions:

Operating Expenses

Expenses incurred in the process of earning sales revenue.

Incremental Effect

The impact of a particular decision on a company's finances, considering only the changes that directly result from the decision.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues.

Fixed Expenses

Costs that do not change in total regardless of changes in the level of business activity or volume.