Table 131 Assume That This Is the Balance Sheet of the Only

question 35

Multiple Choice

Table 13.1
$\begin{array}{c}\text { Balance Sheet }\\\quad\quad\quad\text { Assets } \quad\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }\\\begin{array}{|c|c|c|c|}\hline\text { Vault Cash } & \$ 1,150 & \begin{array}{c}\text { Checking } \\\text { Accounts }\end{array} & \$ 11,300 \\\hline \begin{array}{c}\text { Reserve } \\\text { Deposits }\end{array} & \$ 1,650 & \text { Savings Accounts } & \$ 3,200 \\\hline \text { Loans } & \$ 11,700 & & \\\hline \text { Total Assets } & \$ 14,500 & \text { Total Liabilities } & \$ 14,500\\\hline\end{array}\end{array}$

Assume that this is the balance sheet of the only bank in this economy and that the money supply is entirely kept by the bank in either a checking or a savings account.
-Refer to Table 13.1. Assume a reserve requirement of 8 percent. What is the maximum potential increase in the money supply from the Fed's purchase of $400 worth of government securities?

• A) $62,500
• B) $2,800
• C) $3,200
• D) $4,600
• E) $400

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Definitions:

Debt-to-Equity Ratio

A gauge of a firm's financial risk, determined by dividing its overall debts by the equity of its shareholders.

Year 2

A term often used to refer to the second year of a business operation, project timeline, or financial plan.

Return on Equity

A measure of a company's profitability, indicating how much profit a company generates with the money shareholders have invested.

Year 2

Typically refers to the second year of an entity's operations, plan, or financial reporting.