If the Required Reserve Ratio Is 0

question 129

Multiple Choice

If the required reserve ratio is 0.1, the level of deposits is $1,000, the level of currency held by the public is $200 and the level of excess reserves is $300, then m₁ is

• A) 0.
• B) 1.
• C) 2.
• D) 3.

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Definitions:

Equity Method

An accounting technique used for recording investments in which the investor has significant influence over the investee but does not control it outright.

MACRS Depreciation

The Modified Accelerated Cost Recovery System, a method of depreciation in the U.S. that allows for faster depreciation of assets over time for tax purposes.

Temporary Differences

The differences between the accounting income and taxable income that are not permanent and will reverse in future periods.

Permanent Differences

These are variations between taxable income and accounting income that originate from certain items being recognized in one manner for tax purposes and another for financial reporting purposes and do not reverse over time.