If a Bank Has Deposits Worth $800,000, Total Reserves Worth

question 14

Multiple Choice

If a bank has deposits worth $800,000, total reserves worth $800,000, and the reserve ratio of 0.20, what is the value of excess reserves?

• A) $620,000
• B) $1,000,000
• C) $1,160,000
• D) $640,000
• E) $160,000

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Definitions:

Equity Firm

A company that invests in businesses, typically taking a sizable stake, with the goal of increasing value over time before eventually divesting.

Borrowing

This is the act of obtaining funds from a lender under the agreement to pay back the principal amount along with interest.

Repurchase

The act of buying back goods or securities that were previously sold, often referring to a company buying back its own shares.

Equity Firm

A company that invests its clients' funds in businesses, typically acquiring significant control or full ownership.