If Banks Cannot Lend All of Their Excess Reserves

question 233

Multiple Choice

If banks cannot lend all of their excess reserves:

• A) the money multiplier increases.
• B) the money multiplier decreases.
• C) the money multiplier stays the same.
• D) the amount of loans by the bank increases.
• E) checkable deposits decrease.

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Definitions:

Journal Entry

A record of a business transaction in an accounting system, noting the accounts and amounts to be debited and credited.

Cost Method

An accounting approach where investments are recorded on the balance sheet at their acquisition cost, without recognizing changes in market value.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee, without having control or joint control over those policies.