A Potential Problem with Expansionary Monetary Policy Is That Banks

question 56

Multiple Choice

A potential problem with expansionary monetary policy is that banks can

• A) be loaned up prior to open-market operations.
• B) be unwilling to lend.
• C) decide that a recession is best for the economy.
• D) Each of these answers is correct.

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Definitions:

Allowance Account

A contra-asset account used to record adjustments to accounts receivable, reflecting the amounts expected not to be collected.

Uncollectible

Refers to accounts receivable that are considered to be uncollectable from debtors due to their inability to pay.

Credited

A term used in accounting to denote an increase in liabilities or equity accounts, or a decrease in assets or expense accounts.

Financial Assets

Assets that derive value from a contractual claim, such as cash, stocks, bonds, and bank deposits.