Suppose the ABC Bank Has Excess Reserves of $4,000 and Outstanding

question 48

Multiple Choice

Suppose the ABC bank has excess reserves of $4,000 and outstanding demand deposits of $80,000.If the desired reserve ratio is 25 percent, what is the size of the bank's actual cash reserves?

• A)$16,000
• B)$84,000
• C)$24,000
• D)$20,000

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales activity, such as rent, salaries, and insurance.

Financial Advantage

An economic benefit or superiority that a person or entity holds, giving them a better position in financial transactions or comparisons.

Fixed Expenses

Expenses that remain constant regardless of the volume of goods produced or sold within a specific time frame, like lease payments or wage bills.

Financial Advantage

A benefit gained in terms of financial health, growth, or savings that gives a business or individual a competitive edge.