If the Reserve Ratio Is 20 Percent, How Much Money

question 141

Short Answer

If the reserve ratio is 20 percent, how much money can be created from $100 of reserves? Show your work.

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Definitions:

Interest Accrual

The process of recognizing interest expense or interest income that has been earned but not yet paid or received.

Earnings Per Share

A company's net profit divided by the number of its common shares outstanding, indicating the profitability on a per-share basis.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.

Financing Alternatives

Different options available for a business or individual to fund their activities, including loans, equity investments, and leasing.