Banks Do Not Need to Keep All of Their Deposits

question 241

Multiple Choice

Banks do not need to keep all of their deposits on hand as reserves because

• A)only a fraction of deposits are withdrawn at any one time.
• B)FDIC protects banks from excessive withdrawal demands.
• C)there is too much risk of bank robberies.
• D)they can always generate new reserves through the money creation process.

Comprehend the concept and implications of quiet possession in lease agreements.

Recognize the legal requirements for the creation and termination of lease agreements.

Understand the impact of the Statute of Frauds on lease agreements.

Identify the types of tenancies and their characteristics.

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Definitions:

Gross Method

A method of recording purchases at the gross invoice amount before any trade discounts are subtracted.

Hedging

A strategy used in financial management to offset potential losses or gains that may be incurred by a companion investment, thereby reducing the risk of adverse price movements.

IFRS

International Financial Reporting Standards, a set of global accounting guidelines providing a common language for business affairs so that company accounts are understandable and comparable across international boundaries.

Gross Method

An accounting approach for recording purchases or sales of inventory where discounts are not taken into account until they are actually realized.