The Money-Creation Process Generated by an Injection of Reserves Stops

question 211

Multiple Choice

The money-creation process generated by an injection of reserves stops when

• A)people deposit their loans into other banks.
• B)reserve requirements are raised.
• C)the increase in required reserves equals the size of the injection.
• D)bankers begin to fear runs and stop making loans.

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Definitions:

Straight-Line Amortization

A method of uniformly reducing the book value of an intangible asset over its useful life.

Interest Expense

The expenditure faced by a company for financing through borrowed resources during a defined time.

Book Value

The value of a fixed asset, as recorded on a balance sheet, which represents its historical cost minus accumulated depreciation.

Debentures

A type of long-term debt instrument used by large companies to borrow money, at a fixed rate of interest, and not secured by physical assets or collateral.