A Banking System Has Total Deposits of $200 Billion and Total

question 62

Multiple Choice

A banking system has total deposits of $200 billion and total reserves of $50 billion. If the reserve requirement is 20%, what is the deposit creation potential of the banking system?

• A) $200 billion
• B) $10 billion
• C) $20 billion
• D) $50 billion

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Definitions:

Product Costs

Product costs are the direct expenses associated with manufacturing a product, including direct labor, raw materials, and manufacturing overhead.

Prime Costs

The combination of direct material and direct labor expenses incurred in producing a product.

Direct Materials

Raw materials that can be directly traced to the production of finished goods, considered a variable cost and included in the calculation of the cost of goods sold.

Direct Labor

The wages and other compensation paid to employees who are directly involved in the production of goods or services.