If the Reserve Ratio Is Designated by "R," How Much

question 158

Multiple Choice

If the reserve ratio is designated by "r," how much of a deposit can banks lend out?

• A) 1 / r
• B) (1 - r)
• C) 1 / (1 - r)
• D) r / (1 - r)

---

Definitions:

Indirect Method

A technique used in the statement of cash flows to adjust net income for the effects of non-cash transactions and changes in working capital to determine cash flow from operating activities.

Operating Activities

Activities directly related to the day-to-day operations of a business, such as sales, purchasing, payroll, and other routine business transactions.

Indirect Method

A way of reporting cash flows from operating activities on the statement of cash flows, adjusting net income for changes in non-cash accounts.

Net Decrease

This represents the overall reduction in a specific financial position or quantity over a period, after accounting for all increases and decreases.