Suppose That a Bank's Actual Reserves Are $5 Million, Its

question 114

Multiple Choice

Suppose that a bank's actual reserves are $5 million, its checkable deposits are $5 million, and its excess reserves are $3 million. The reserve requirement must be

• A) 40 percent.
• B) 20 percent.
• C) 10 percent.
• D) 5 percent.

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Definitions:

Periodic Inventory Method

An accounting approach where inventory values and cost of goods sold are determined at the end of an accounting period through physical inventory counts.

Purchases Discount

A reduction in the invoice price of goods, granted by the seller to the buyer for early payment within a specified time frame.

Gross Method

An accounting method for recording inventory purchases without deducting discounts at the time of purchase.

Periodic Inventory System

An inventory system that, at the end of each accounting period, calculates the cost of the unsold goods on hand by taking the cost of each unit times the number of units of each product on hand.