If the Reserve Ratio Is 10 Percent,$1,000 of Additional Reserves

question 193

Multiple Choice

If the reserve ratio is 10 percent,$1,000 of additional reserves can create

• A)$5,000 of new money.
• B)$9,000 of new money.
• C)$10,000 of new money.
• D)None of the above is correct.

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Definitions:

Liquidity Ratio

Financial metrics that measure a company's ability to meet its short-term obligations with its liquid assets.

Inventory Turnover

A measure of how many times a company's inventory is sold and replaced over a period, indicating the efficiency of inventory management.

Return on Assets

A profitability ratio that measures how effectively a company uses its assets to generate profit, calculated as net income divided by total assets.

Vertical Analysis

A financial analysis method that expresses each item in a financial statement as a percentage of a base amount to compare different years or companies.