When the Required Reserve Ratio Is Increased, the Excess Reserves

question 46

Multiple Choice

When the required reserve ratio is increased, the excess reserves of banks are

• A) reduced, but the multiple by which the commercial banking system can lend is unaffected.
• B) reduced and the multiple by which the commercial banking system can lend is increased.
• C) increased and the multiple by which the commercial banking system can lend is increased.
• D) reduced and the multiple by which the commercial banking system can lend is reduced.

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Definitions:

Significant Influence

A level of control in an investment relationship, generally assumed to exist if the investor holds 20% to 50% of the voting stock of the investee company.

Outstanding Voting Common Stock

Shares of common stock that are held by investors, excluding those owned by the company itself, which have voting rights.

Amortization

The process of spreading the cost of an intangible asset over its useful life.

Inventory Costing

Methods for assigning costs to inventory and to the cost of goods sold, such as FIFO (First-In, First-Out) or LIFO (Last-In, First-Out), impacting financial statements.