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

question 24

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 demand deposits are the only form of money. A commercial bank receiving a new demand 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:

Statistical Control Chart

A tool used in manufacturing and business processes to plot data points over time and identify variances from the norm to detect and control predictable behaviors within a process.

Labour Efficiency Variance

A measure used in budgeting and accounting to analyze the difference between the actual hours worked and the standard hours expected for a task.

Critical Values

Specific points on a statistical distribution that are used to decide whether to reject the null hypothesis in hypothesis testing.

Materials Account

An account used to track the cost of raw materials that are bought and used during production processes.