If a Bank's Desired Reserve-Deposit Ratio Is 0

question 47

Multiple Choice

If a bank's desired reserve-deposit ratio is 0.33 and it has deposit liabilities of $100 million and reserves of $50 million, it:

• A)has too few reserves and will reduce its lending.
• B)has too many reserves and will increase its lending.
• C)has the correct amount of reserves and outstanding loans.
• D)should increase the amount of its reserves.

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Definitions:

Essential Value

The inherent or fundamental worth of an asset, product, or service, often considered irrespective of market value or price.

Life Cycle Budgeting

Involves the estimation of costs associated with a product or project from its inception to disposal, considering all stages of its life.

Throughput Accounting

An accounting method that focuses on the rate at which a company generates money through sales, emphasizing the bottlenecks in the production process.

Financial Measures

Metrics used to assess a company's performance in terms of profitability, liquidity, solvency, and operational efficiency.