If the Reserve Requirement Was 5% and a Bank Customer

question 115

Multiple Choice

If the reserve requirement was 5% and a bank customer makes a deposit of $1,000, the initial result would be:

• A)​a $950 increase in required reserves and a $50 increase in excess reserves.
• B)​a $20,000 increase in required reserves and a $950 increase in excess reserves.
• C)​a $50 increase in required reserves and a $20,000 increase in excess reserves.
• D)​none of the above

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Definitions:

Deducted Immediately

Expenses that can be subtracted from gross income in the year they are incurred, without capitalization or amortization.

Employer-sponsored Retirement Plan

An employer-sponsored retirement plan is a savings plan set up by employers to help employees prepare for retirement, with common types being 401(k) and 403(b) plans.

Deductible Contribution

An eligible contribution to a qualified plan or account that reduces taxable income.

Coverdell Education Savings Account

A savings account that allows money to grow tax-free when the funds are used for education expenses.