369 $
© 2014 Pearson Canada Inc.$- Using T-accounts show what happens to reserves at New National Bank if one individual
deposits $1000 in cash into her chequing account and another individual withdraws $750 in cash
from her chequing account.
Answer: New National Bank
Assets Liabilities
Reserves +$250 Demand deposits +$250
Diff: 1 Type: SA Page Ref: 297 - 300
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
13.3 General Principles of Bank Management
Which of the following are primary concerns of the bank manager?
A) Maintaining sufficient reserves to minimize the cost to the bank of deposit outflows
B) Extending loans to borrowers who will pay low interest rates, but who are poor credit risks
C) Acquiring funds at a relatively high cost, so that profitable lending opportunities can be
realized
D) Maintaining high levels of capital and thus maximizing the returns to the owners
Answer: A
Diff: 2 Type: MC Page Ref: 300
Skill: Recall
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
If a bank has $100,000 of demand deposits, a desired reserve ratio of 20 percent, and it holds
$40,000 in reserves, then the maximum deposit outflow it can sustain without altering its balance
sheet is ____.
A) $30,000
B) $25,000
C) $20,000
D) $10,000
Answer: B
Diff: 1 Type: MC Page Ref: 300 - 303
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans
If a bank has $200,000 of demand deposits, a desired reserve ratio of 20 percent, and it holds
$80,000 in reserves, then the maximum deposit outflow it can sustain without altering its balance
sheet is ____.
A) $50,000
B) $40,000
C) $30,000
D) $25,000
Answer: A
Diff: 1 Type: MC Page Ref: 300 - 303
Skill: Applied
Objective List: 13.2 Specify how banks make profits by accepting deposits and making loans