If Households Choose to Take Some Fraction of Each Check

question 53

Multiple Choice

If households choose to take some fraction of each check they deposit and hold it as currency,then the simple deposit multiplier ________ the real-world multiplier.

• A)is greater than
• B)is less than
• C)is equal to
• D)bears no relationship to

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Definitions:

Total Assets

The sum of all current and non-current assets that a company owns, representing the total resources available to the business for use.

Allowance Method

An accounting technique that estimates and anticipates uncollectible accounts receivable and bad debts by establishing an allowance for doubtful accounts.

Bad Debts Expense

An expense recognized on a company’s income statement, representing the amount of accounts receivable that is not expected to be collected due to customers' inability to fulfill financial obligations.

Uncollectibles

Accounts receivable that a company has determined are unlikely to be collected and writes off as a bad debt expense.