Use the Following Example for to Answer the Next Five

question 14

Multiple Choice

Use the following example for to answer the next five questions:
Imagine that you deposit $25,000 in currency (which you had been storing in your closet) , into your checking account at the bank. Assume that this institution has a required reserve ratio of 25%.
-What is true about banks in a fractional reserve banking system?

• A) Banks can lend all of the deposits that are received.
• B) Banks have to purchase gold that has the value of the deposits received.
• C) Banks must deposit all cash from depositors with the Federal Reserve.
• D) Banks face the risk of not having enough cash to meet withdrawal needs.
• E) Banks have to deposit all cash from depositors in their own bank vault.

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Definitions:

Tax Return

The form or forms used to report income and file income taxes with tax authorities, including information on income earned, deductions, and credits claimed.

Taxable Income (TI)

This term refers to the gross income of an individual or corporation, less any allowable tax deductions or exemptions, which is subject to taxation by governmental authorities.

Adjusted Gross Income (AGI)

A measure of income calculated from your gross income and used to determine how much of your income is taxable after certain deductions are applied.

Personal and Dependency Exemptions

Tax deductions previously allowed for the taxpayer, their spouse, and eligible dependents, though suspended for federal taxes from 2018 through 2025.