Assume We Have a Simplified Banking System in Balance-Sheet Equilibrium

question 19

Multiple Choice

Assume we have a simplified banking system in balance-sheet equilibrium. Also assume that all banks are subject to a uniform 10 percent reserve requirement and checkable deposits are the only form of money. A commercial bank receiving a new checkable deposit of $100 would be able to extend new loans in the amount of:

• A) $10.
• B) $90.
• C) $100.
• D) $1,000.

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Definitions:

Economic Life

The duration during which an asset remains useful to the owner or is expected to generate economic benefits.

Gross Receivable

The total amount owed to a company for goods sold or services rendered before any deductions for returns or allowances.

Executory Costs

Expenses arising from operational agreements, such as leases, which are not yet settled.

Periodic Lease Rental Payments

Regular payments made by a lessee to a lessor for the use of property, equipment, or vehicles, typically established under a lease agreement.