Suppose Bank a Holds $200 of Reserves, Has Deposits of $1000

question 143

Multiple Choice

Suppose Bank A holds $200 of reserves, has deposits of $1000, and the desired reserve ratio is 15 percent. How many loans can Bank A create at Bank A?

• A) zero, because Bank A has no excess reserves
• B) $200
• C) $50
• D) $850

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Definitions:

Aging

A method used to categorize accounts receivable based on the length of time an invoice has been outstanding.

Accounts Receivable

Unpaid customer debts to a company for goods or services that have been supplied.

Bad Debts Expense

An expense reported on the income statement reflecting the cost of estimated uncollectible accounts receivable.

Net Credit Sales

Sales made on credit minus any sales returns or allowances, reflecting the actual credit sales revenue.