(Table) Consider the T-Account in the Table A) the Potential Money Multiplier and the Actual Money Multiplier

question 88

Multiple Choice

(Table) Consider the T-account in the table. If the reserve requirement is 20%, then: $$\begin{array} { | l | l | } \hline \text { Assets } & \text { Liabilities } \\\hline \$ 14,000 \text { (cash) } & \begin{array} { l } \$ 50,000 \text { (checking account } \\\text { balances) }\end{array} \\\hline \$ 56,000 \text { (loans) } & \begin{array} { l } \$ 20,000 \text { (loan recipients' checking } \\\text { account balances) }\end{array} \\\hline\end{array}$$

• A) the potential money multiplier and the actual money multiplier are the same.
• B) the potential money multiplier is larger than the actual money multiplier.
• C) the potential money multiplier is smaller than the actual money multiplier.
• D) the actual money multiplier is zero.

---

Definitions:

Administrative Expenses

Costs associated with the general administration of a business, such as salaries of executive officers, legal and professional fees.

Flexible Budget

A budget designed to change in response to variations in volume or activity levels.

Food

A substance consumed by living organisms to provide nutritional support, primarily obtained through plants, animals, or fermentation.

Supplies

Items used in the operation of a business or manufacturing process, which are not directly associated with the products being made.