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If the Reserve Ratio Was 10% for the Bank with the Balance

Question 21

Multiple Choice

If the reserve ratio was 10% for the bank with the balance sheet listed below, then this bank is being
 Assets  Reserves $2,500,000 Loans Outstanding $2,000,000 Total $5,500,000 Liabilities & Net Worth Checking deposits$5,000,000 Net Worth Stockholders’ Equity$500,000 Total$5,500,000\begin{array}{c}\begin{array}{lr}\text { Assets }\\\text { Reserves } &\$ 2,500,000 \\\text { Loans Outstanding } & \$ 2,000,000 \\\hline \text { Total } & \$ 5,500,000\\\\\\\end{array}\begin{array}{lll}\text { Liabilities \& Net Worth }\\\text {Checking deposits}& \$ 5,000,000\\\\\text { Net Worth }\\\text {Stockholders' Equity}& \$ 500,000\\\hline \text { Total}& \$5,500,000 \\\end{array}\end{array}


A) aggressive as indicated by a small amount of excess reserves.
B) aggressive as indicated by a large amount of excess reserves.
C) cautious as indicated by a small amount of excess reserves.
D) cautious as indicated by a large amount of excess reserves.

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