If Many Banks Fail, This Is Likely To

question 41

Multiple Choice

If many banks fail, this is likely to:

• A) increase the ratio of currency to deposits.
• B) decrease the ratio of currency to deposits.
• C) have no effect on the ratio of currency to deposits.
• D) decrease the amount of currency in circulation, if the Fed takes no action.

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Definitions:

Horizontal Analysis

A financial analysis technique that evaluates changes in financial statement items over a series of accounting periods, showcasing trends and growth patterns.

Times Interest Earned

Measures a company’s ability to meet interest payments as they come due; computed by dividing the sum of net income, interest expense, and income tax expense by interest expense.

Income Statement

Financial statement that reports a company's financial performance over a specific accounting period, detailing revenues, expenses, and net income or loss.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time.