(Table) SCENARIO: Assume That Empathy State Bank Begins with the Balance

question 82

Multiple Choice

(Table) SCENARIO: Assume that Empathy State Bank begins with the balance sheet shown and is fully loaned-up. Vanessa has a checking account at Empathy State Bank. If she writes a check for $5,000 to pay for her new car and if the bank has a reserve requirement of 5%, this bank's excess reserves will be

• A) $250.
• B) $5,250.
• C) $0; Empathy State Bank will be fully loaned-up.
• D) negative; Empathy State Bank will need to acquire $2,250 in reserves.

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Definitions:

Full Disclosure Principle

A fundamental accounting principle requiring that financial statements provide all necessary information to stakeholders to understand a firm's financial condition.