If a Bank That Is Subject to a 10 Percent

question 167

Multiple Choice

If a bank that is subject to a 10 percent required reserve ratio has $20,000 in excess reserves, it can make new loans of:

• A) $2,000.
• B) $18,000.
• C) $20,000.
• D) $200,000.

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Definitions:

Silence

The absence of sound or the choice to refrain from speaking or making noise.

Legal Recognition

The formal acknowledgment by a legal authority that validates the status, rights, or legitimacy of an entity, action, or agreement.

Unilateral Contract

A contract in which only one party makes an enforceable promise to do or refrain from doing something if the other party performs some act.

Binding Contract

An agreement between parties that is legally enforceable by law, containing all essential elements of a contract.