A Bank Is Reserve Deficient When

question 117

Multiple Choice

A bank is reserve deficient when

• A) its reserves fall short of the level determined by the required reserve ratio.
• B) its excess reserves are greater than its required reserves.
• C) its required reserves are greater than its excess reserves.
• D) it purchases government securities from the Fed.

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Definitions:

Net Operating Income

Income from normal business operations after subtracting operating expenses but before interest and taxes.

Fixed Manufacturing Overhead

Expenses related to manufacturing that remain constant regardless of the level of production, such as building lease payments and equipment depreciation.

Deferred Inventories

Inventory costs that are not expensed in the period they are incurred but are deferred to a future period.

Absorption Costing

This accounting practice involves adding all costs associated with production, including direct materials, labor, and both kinds of overhead expenses (variable and fixed), into the cost calculation of a product.