If a Bank Has $100,000 of Checkable Deposits,a Required Reserve

question 96

Multiple Choice

If a bank has $100,000 of checkable deposits,a required reserve ratio of 20 percent,and it holds $40,000 in reserves,then the maximum deposit outflow it can sustain without altering its balance sheet is

• A)$30,000.
• B)$25,000.
• C)$20,000.
• D)$10,000.

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Definitions:

Fixed Cost

Costs that remain unchanged regardless of the level of production or sales activities within a certain range and period.

Variable Cost

Costs that vary directly with the level of production or service, such as materials and labor.

Traditional Format

A foundational approach to accounting and finance that emphasizes historical cost accounting, generally accepted accounting principles (GAAP), and the use of financial statements.

Contribution Format

The contribution format is an income statement presentation that separates fixed costs from variable costs, highlighting the contribution margin.