5. The correct answer is B) the liabilities of the bank increase by $1,000,000. When a bank receives a deposit, it is considered a liability because the bank owes this money to the depositor. The bank is required to keep 20% of the deposit as reserve, which is $200,000 in this case. The remaining $800,000 can be loaned out, but this does not change the fact that the bank's liabilities have increased by the full amount of the deposit, which is $1,000,000.

6. The correct answers are C) A bank's balance sheet shows that total assets equal total liabilities plus equity capital and D) A bank's balance sheet indicates whether or not the bank is profitable. A bank's assets are its uses of funds, not its sources. Similarly, a bank's liabilities are its sources of funds, not its uses.

7. The correct answer is D) Bank capital is recorded as an asset on the bank balance sheet. This statement is false because bank capital is actually recorded as equity, not an asset. Bank capital represents the net worth of the bank, which is the difference between its assets and liabilities.

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5. The correct answer is B) the liabilities of the bank increase by $1,000,000. When a bank receives a deposit, it is considered a liability because the bank owes this money to the depositor. The bank is required to keep 20% of the deposit as reserve, which is $200,000 in this case. The remaining $800,000 can be loaned out, but this does not change the fact that the bank's liabilities have increased by the full amount of the deposit, which is $1,000,000.

6. The correct answers are C) A bank's balance sheet shows that total assets equal total liabilities plus equity capital and D) A bank's balance sheet indicates whether or not the bank is profitable. A bank's assets are its uses of funds, not its sources. Similarly, a bank's liabilities are its sources of funds, not its uses.

7. The correct answer is D) Bank capital is recorded as an asset on the bank balance sheet. This statement is false because bank capital is actually recorded as equity, not an asset. Bank capital represents the net worth of the bank, which is the difference between its assets and liabilities.

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5. The correct answer is B) the liabilities of the bank increase by $1,000,000. When a bank receives a deposit, it is considered a liability because the bank owes this money to the depositor. The bank is required to keep 20% of the deposit as reserve, which is $200,000 in this case. The remaining $800,000 can be loaned out, but this does not change the fact that the bank's liabilities have increased by the full amount of the deposit, which is $1,000,000.

6. The correct answers are C) A bank's balance sheet shows that total assets equal total liabilities plus equity capital and D) A bank's balance sheet indicates whether or not the bank is profitable. A bank's assets are its uses of funds, not its sources. Similarly, a bank's liabilities are its sources of funds, not its uses.

7. The correct answer is D) Bank capital is recorded as an asset on the bank balance sheet. This statement is false because bank capital is actually recorded as equity, not an asset. Bank capital represents the net worth of the bank, which is the difference between its assets and liabilities.

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