The Reason Why the Banking System Can Increase Checkable Deposits

question 91

Multiple Choice

The reason why the banking system can increase checkable deposits by a multiple of initial deposits is that:

• A)the banking system must keep reserves equal to 100 percent of its checkable deposits.
• B)the central bank follows policies that prevent reserves from falling below the level required by law.
• C)reserves lost by any particular bank are gained by the Federal Reserve Bank.
• D)borrowers often spend most of a loan which is then deposited.

Discuss the impact of inflation on the value of money.

Understand the regulatory framework of banking and its impact on bank operations and stability.

Recognize the practical applications and implications of monetary concepts on personal finance decisions.

Explain the mechanisms in place to prevent bank panics and ensure the stability of the banking system.

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Definitions:

Deceptive Advertisement

Marketing communication that misleads consumers about the characteristics, benefits, or quality of a product or service.

Consumer Law

A branch of law that deals with the rights of consumers and the regulation of trade practices to protect those rights.

Truth in Lending Act

A federal law designed to promote informed use of consumer credit by requiring disclosures about its terms and cost.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including interest rates, repayment schedule, and other critical terms of the credit agreement.