The Table Below Shows the Data (In Millions) for Wells

question 573

Multiple Choice

The table below shows the data (in millions) for Wells Fargo Bank in September 2007 and September 2008.Suppose that the required reserve ratio is 3 percent. $$\begin{array} { | c | c | c | } \hline & 2007 & 2008 \\\hline \text { Loans } & 79 & 100 \\\hline \text { Reserves } & 11 & 11 \\\hline \text { Deposits } & 247 & 266 \\\hline\end{array}$$
The data show that

• A) the currency drain ratio increased.
• B) the Federal Reserve must have increased the required reserve ratio.
• C) Wells Fargo had excess reserves and could create money in 2007.
• D) Wells Fargo was only able to make more loans in 2008 because it gained more deposits.

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Definitions:

Carrying Amount

The amount at which an asset or liability is recognized on the balance sheet after deducting any accumulated depreciation, amortization, or impairment.

Fair Value

An estimate of the price at which an asset or liability would be traded between knowledgeable, willing parties in an arm's length transaction.

Costs To Sell

The direct costs attributable to the disposition of an asset, excluding finance costs and income taxes.

Impairment Loss

A charge to the income statement that occurs when the carrying amount of an asset exceeds its recoverable amount, indicating the asset is not expected to generate future economic benefits.