Under Which of the Following Circumstances Is the Size of the Effect

question 87

Multiple Choice

Under which of the following circumstances is the size of the effect of a given deposit of cash into a demand deposit account on the money supply smaller?

• A)the greater the fraction of money people want to hold as currency, and the greater the fraction of deposits banks want to hold as reserves
• B)the greater the fraction of money people want to hold as currency, and the smaller the fraction of deposits banks want to hold as reserves
• C)the smaller the fraction of money people want to hold as currency, and the greater the fraction of deposits banks want to hold as reserves
• D)the smaller the fraction of money people want to hold as currency, and the smaller the fraction of deposits banks want to hold as reserves

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Definitions:

Deferred Income Tax

Income tax obligations that a company has accrued but not yet paid, appearing on the balance sheet as a liability.

Amortizable Capital Assets

Long-term assets whose cost is gradually expensed over their useful life, such as buildings and equipment.

Temporary Differences

Differences between the accounting value and tax value of assets and liabilities, resulting in deferred tax assets or liabilities.

Deferred Income Taxes

Taxes that are assessed or paid on income that is recognized in one period for financial reporting purposes but in a different period for tax purposes.