The Multiple by Which the Chartered Banking System Can Expand

question 61

Multiple Choice

The multiple by which the chartered banking system can expand the supply of money on the basis of excess reserves:

• A)is larger the smaller the desired reserve ratio.
• B)is the reciprocal of the bank's actual reserves.
• C)is directly or positively related to the size of the desired reserve ratio.
• D)will be zero when the desired reserve ratio is 50 percent.

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Definitions:

Operating Activities

Transactions and events that pertain to the primary business operations, impacting the net income and involving cash flows related to operating expenses and revenues.

Indirect Method

A method for preparing cash flow statements where net income is adjusted for changes in balance sheet items to compute cash from operating activities.

Operating Activities

Transactions related to the primary operations of a business, such as sales revenue and expenses, that affect the cash flow.

Current Assets

Assets that a company expects to convert to cash, sell, or consume within one year or its operating cycle, whichever is longer.