A Single Bank Is Limited in Its Ability to Create

question 110

Multiple Choice

A single bank is limited in its ability to create money because

• A)loan recipients usually take the proceeds of the loan in cash.
• B)the FDIC will not permit it to create money unless the loans are guaranteed by the federal government.
• C)the money loaned will probably be deposited in another bank.
• D)federal legislation prohibits banks from creating money except to finance international trade.

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Definitions:

Salaries and Wages Payable

Liabilities arising from employees' salaries and wages that have been earned but not yet paid.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the correct periods.

Supplies Account

An account that tracks the cost of supplies used or on hand during an accounting period.

Inventory

The total amount of goods held by a company for the purpose of resale or production.