A Bank Is Insolvent When

question 97

Multiple Choice

A bank is insolvent when

• A)its liabilities exceed its assets.
• B)its assets exceed its liabilities.
• C)its capital exceeds its liabilities.
• D)its assets increase in value.

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Definitions:

Checkable Deposits

Checkable deposits are bank account balances that depositors can easily withdraw or write checks against at any time, constituting a primary medium of exchange for personal and business transactions.

Required Reserve Ratio

The proportion of depositors' balances banks must have on hand as cash, mandated by the central bank.

Excess Reserves

The reserves held by banks that are greater than the minimum amounts required by regulators, which can be lent out or invested.

Checkable Deposits

Bank account balances that can be withdrawn on demand using checks or electronic methods.