If a Bank Subject to a 10% Required Reserve Ratio

question 291

Multiple Choice

If a bank subject to a 10% required reserve ratio has $10,000 in excess reserves,it can extend,at a maximum,which quantity of new loans?

• A)$1,000
• B)$9,000
• C)$10,000
• D)$100,000

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Definitions:

Adjusting Entries

Entries recorded in financial journals at the conclusion of an accounting period for the purpose of assigning earnings and expenditures to their rightful period.

Work Sheet

A document or tool used in accounting to gather information and perform calculations for preparing financial statements and other reports.

Retained Earnings

The portion of a company's profits not distributed as dividends but retained for reinvestment in the business or to pay off debt.

Income Summary

An account used in the closing process during the accounting cycle that sums up all revenues and expenses for the period to determine the net income or loss for the period.