A Bank's Checkable Deposits Shrink from $40 Million to $33

question 183

Multiple Choice

A bank's checkable deposits shrink from $40 million to $33 million. What happens to its required reserves if the required reserve ratio is 3 percent?

• A) They fall by about $1.2 million.
• B) They fall by about $10 million.
• C) They fall by about $7 million.
• D) They fall by about $0.2 million.

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Definitions:

Inventory Valuation

The process of estimating the value of a company's inventory at cost or market value, whichever is lower.

LIFO

Last In, First Out, an inventory accounting method where the most recently produced items are recorded as sold first.

FIFO

"First In, First Out," an inventory valuation method where goods purchased or produced first are sold or used first.

Exchange Gain

A profit resulting from foreign currency transactions, due to favorable changes in exchange rates.