Suppose That a Bank with No Excess Reserves Receives a Deposit

question 63

Multiple Choice

Suppose that a bank with no excess reserves receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum amount that the bank can lend out?

• A)$2000
• B)$8000
• C)$10,000
• D)$50,000

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Definitions:

Reconciliation Functions

The process of ensuring that two sets of records (usually the balances of two accounts) are in agreement, to ensure accuracy and consistency in financial accounts.

Federal Unemployment Compensation Taxes

Taxes imposed on employers to fund unemployment benefits for workers who have lost their jobs.

Medicare Taxes

Taxes deducted from paychecks to fund the Medicare program, which provides health insurance to individuals over 65 or with certain disabilities.

Contingent Liabilities

Liabilities that may arise from past transactions if certain events occur in the future.