A Bank That Has $10,000 in Excess Reserves Can Extend

question 163

Multiple Choice

A bank that has $10,000 in excess reserves can extend new loans up to a maximum of

• A) $1,000.
• B) $9,000.
• C) $10,000.
• D) $100,000.

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Definitions:

Variable Expense

Expenses that vary directly with changes in production volume or business activity levels.

Contribution Margin Ratio

A ratio that measures the proportion of sales revenue that exceeds variable costs, indicating how effectively a company can cover its fixed costs.

Target Profit

The desired net profit a company aims to achieve for a specific period.

Monthly Fixed Expense

Costs that do not vary in total regardless of production volume or sales levels, paid on a monthly basis.