Suppose a Bank Has $400,000 in Deposits,a Minimum Reserve Requirement

question 34

Multiple Choice

Suppose a bank has $400,000 in deposits,a minimum reserve requirement of 25 percent,and bank reserves of $100,000.Then the bank can make new loans in the amount of:

• A) $100,000
• B) $75,000
• C) $25,000
• D) $0

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Definitions:

Carrying Cost

Expenses incurred by holding inventory or assets over a period, including storage, insurance, and opportunity costs.

Present Value

The present value of an amount of money or series of payments to be received in the future, calculated using a particular interest rate.

Credit Policy Change

Adjustments made to the guidelines that govern the extension of credit to customers, affecting terms of payment and eligibility.

One-Shot Approach

A strategy or method applied once to address an issue or solve a problem, without plans for repeated application or follow-up.