Suppose a Bank Has $100,000 in Checking Account Deposits with No

question 119

Multiple Choice

Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 5 percent.If the Federal Reserve lowers the required reserve ratio to 3 percent,then the bank will now have excess reserves of

• A)$0.
• B)$2,000.
• C)$3,000.
• D)$5,000.

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Definitions:

Depreciation

The process of allocating the cost of buildings and equipment (but not land) over their productive lives using a systematic and rational method

Accounts Receivable

Represents money owed to a company by its customers for goods or services that have been delivered but not yet paid for.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash flow from operating activities.

Depreciation Expense

The allocated portion of the cost of a tangible fixed asset written off each year, reflecting its usage and wear and tear.