Everything Else Held Constant,an Increase in the Excess Reserves Ratio

question 24

Multiple Choice

Everything else held constant,an increase in the excess reserves ratio causes the M1 money multiplier to ________ and the money supply to ________.

• A)decrease;increase
• B)increase;increase
• C)decrease;decrease
• D)increase;decrease

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Definitions:

Short-Term Solvency

A company's ability to meet its short-term obligations, often assessed using liquidity ratios.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances from temporary accounts to permanent ones, preparing the books for the next period.

End-of-Period Spreadsheet

A tool, typically in spreadsheet format, used at the end of an accounting period to compile adjustments and prepare financial statements.

Adjusted Trial Balance

A list of all the accounts and their balances after adjusting entries have been made, used to prepare financial statements.