Consider the Following Information About a Banking System: New Currency

question 155

Multiple Choice

Consider the following information about a banking system: new currency deposited in the system = $40 billion, legal reserve ratio = 0.20, excess reserves prior to the currency deposit = $0. The $40 billion deposit of currency
Into checking accounts will initially create

• A) $8 billion of new checkable deposits.
• B) $10 billion of new checkable deposits.
• C) $40 billion of new checkable deposits.
• D) $200 billion of new checkable deposits.

Comprehend the BAT and Miller-Orr models for managing cash balances.

Define and explain the use of money market instruments in liquidity management.

Understand the functions and benefits of concentration accounts, lockboxes, and zero-balance accounts in cash management.

Recognize the role of smart cards and other electronic methods in managing cash.

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Definitions:

Primary Job

The main occupation or role that a person holds, usually the source of most of their income.

Professionalism

The conduct, aims, or qualities that characterize or mark a profession or professional person; it embodies a standard of behavior and knowledge expected from individuals in a specific field.

Critical Thinking

The objective analysis and evaluation of an issue in order to form a judgment.

Knowledge

The information, understanding, and skills acquired through experience or education.