Suppose That Initially a Bank Has Excess Reserves of $800

question 93

Multiple Choice

Suppose that initially a bank has excess reserves of $800 and the reserve ratio is 30%. Then Andy deposits $1,000 of cash in his checking account and the bank lends $600 to Molly. That bank can lend an additional:

• A) $100.
• B) $800.
• C) $900.
• D) $300.

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Definitions:

Profit Margin Ratio

A financial metric used to evaluate a company's profitability by comparing net income to revenue.

Economic Conditions

The state of a country or region's economy, influenced by factors such as GDP, unemployment rates, and inflation.

Industry Average

A statistical measure that represents the average performance or output of companies within a particular sector or industry.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances before the preparation of financial statements, ensuring records adhere to the accrual basis of accounting.