Use the Following Balance Sheet (Values in Thousands of Dollars)

question 35

Multiple Choice

Use the following balance sheet (values in thousands of dollars) to answer the question. If the bank experiences a $50 000 sudden liquidity drain caused by withdrawal of their demand deposits, what will be the impact on the balance sheet if purchased liquidity management techniques are used?

• A) A reduction in cash of $21 000 and a decrease in demand deposits of $29 000.
• B) A reduction in securities and/or current loans totalling $50 000.
• C) A reduction in demand deposits of $50 000 and an increase in interbank borrowings of $50 000.
• D) A decrease in equity of $50 000.

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Definitions:

Individualistic Culture

Characterizes societies that value personal freedom and independence, with an emphasis on individual achievements and rights.

Labor Costs

Expenses related to compensating employees, including wages, benefits, and taxes.

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The experience of disorientation and stress that results from being in an unfamiliar cultural environment.