Suppose Warren Buffet Withdraws $1 Million from His Checking Account

question 36

Multiple Choice

Suppose Warren Buffet withdraws $1 million from his checking account at Chase Manhattan Bank.If the required reserve ratio is 20 percent,what is the maximum change in deposits in the banking system?

• A)-$5 million
• B)-$4 million
• C)-$200,000
• D)$1 million
• E)$5 million

---

Definitions:

Financing Activities

Transactions and events where a company generates or pays back capital, including issuing shares or debt and dividend payments.

Balance Sheet

A financial statement that presents a company’s financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Statement Of Cash Flows

A financial report that provides a summary of a company's cash inflows and outflows over a specific period.

Net Income

The total profit of a company after all revenues and gains are added together and all expenses and losses are subtracted.