Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Update the T-account for the withdrawal → Recalculate required reserves → Assess excess reserves
B
Assess excess reserves → Update the T-account for the withdrawal → Recalculate required reserves
C
Recalculate required reserves → Assess excess reserves → Update the T-account for the withdrawal
D
Update the T-account for the withdrawal → Assess excess reserves → Recalculate required reserves
Understanding the Answer
Let's break down why this is correct
Answer
When a customer makes a withdrawal from their account, the bank first needs to update its T-accounts to reflect this change. The bank will decrease the liability side of the T-account for the customer's account because the amount the bank owes to that customer is now less. Next, the bank will also decrease its reserves on the asset side, as it has less cash available. After updating these accounts, the bank should ensure that its total assets still equal its total liabilities plus equity, as this is crucial for maintaining accurate financial records. For example, if a customer withdraws $100, the bank would reduce the customer’s account by $100 and also decrease its cash reserves by $100.
Detailed Explanation
First, the bank updates the T-account to show the withdrawal. Other options are incorrect because This option suggests checking excess reserves first; This option starts with recalculating reserves.
Key Concepts
T-Accounts
Bank Reserves
Monetary Policy
Topic
T-Accounts and Bank Reserves
Difficulty
easy level question
Cognitive Level
understand
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