The Large Increase in the Excess Reserves Held by the Commercial

question 110

Multiple Choice

The large increase in the excess reserves held by the commercial banking system during the second half of 2008,

• A) increases the likelihood of a sharp contraction in the money supply, which would increase the length and severity of the recession.
• B) increases the likelihood of a rapid increase in the money supply, potentially leading to future inflation.
• C) is merely a continuation of the trend present since 1990.
• D) reduces the ability of banks to extend additional loans.

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Definitions:

Independent Auditors

Independent auditors are external auditors who examine the financial records and practices of a corporation to ensure accuracy and compliance with generally accepted accounting principles.

Financial Statements

Comprehensive reports that provide information on a company's financial performance, financial position, and cash flows over a specific period.

Corporate Governance

The procedures designed to ensure that the company is managed in the interests of the shareholders.