Assume That When $100 of New Reserves Enter the Banking

question 139

True/False

Assume that when $100 of new reserves enter the banking system, the money supply ultimately increases by $800. Assume also that no banks hold excess reserves and that the entire money supply consists of bank deposits. If, at a point in time, reserves for all banks amount to $750, then at that same point in time, loans for all banks amount to $6,000.

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Definitions:

Corporation Income Statement

A financial statement that shows a company's revenues, expenses, and profits or losses over a specific time period.

Common Stockholders' Equity

The portion of a company's equity owned by common shareholders, calculated as total assets minus total liabilities and preferred stocks.

Net Income

The ultimate earnings of a company, calculated by subtracting expenses and taxes from its gross revenue.

Stockholders' Equity Statement

A financial statement that shows the changes in the equity of a company's shareholders over a specific period.