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

question 44

Multiple Choice

Use the following balance sheet (values in thousands of dollars) to answer the question. $$\begin{array} { | l | r | l | r | } \hline{ \text { Assets } } & & { \text { Liabilities and equity } } & \\\hline \text { Cash required reserves } & 21 & \text { Demand deposits } & 550 \\\hline \text { Short-term securities } & 369 & \text { Interbank borrowed funds } & 151 \\\hline \text { Loans } & 400 & \text { Equity } & 89 \\\hline \text { Total } & 790 & \text { Total } & 790 \\\hline\end{array}$$ 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:

Planned Behavior

Refers to the Theory of Planned Behavior, which predicts how individuals' intentions toward behaviors are influenced by attitudes, subjective norms, and perceived behavioral control.

Attitude Strength

The durability and impact of an attitude on behavior and thoughts, with stronger attitudes being more consistent, resistant to change, and predictive of behavior.

Cognitive Dissonance

The mental discomfort experienced by an individual who holds two or more contradictory beliefs, ideas, or values simultaneously.

Subjective Norm

The perceived social pressure to engage or not engage in a particular behavior, based on the individual's belief about what important others think they should do.