Scenario: Alpha Bank Has $100,000 in Total Assets and $45,000

question 1

Multiple Choice

Scenario: Alpha Bank has $100,000 in total assets and $45,000 in total liabilities. Beta Bank has $250,000 in total assets and $220,000 in total liabilities.
-Refer to the scenario above.What would happen to each bank if its total assets dropped by 20 percent?

• A) Both banks would still be solvent.
• B) Both banks would become insolvent.
• C) Alpha Bank would be insolvent, and Beta Bank would still be solvent.
• D) Alpha Bank would still be solvent, and Beta Bank would be insolvent.

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Definitions:

Economic Crisis

A situation where a country's economy experiences a sudden downturn characterized by financial instability, high unemployment rates, and decreasing GDP.

John Maynard Keynes

A British economist whose theories on government intervention in the economy and demand-side economics profoundly impacted economic policies in the mid-20th century.

Economic Depressions

Extended periods of significant decline in economic activity across the economy, marked by high unemployment, low manufacturing output, and reduced trade and commerce.

Business Cycle

Refers to the fluctuating levels of economic activity over time, including periods of expansion, peak, recession, and recovery.