When an Individual Deposits Currency into a Checking Account

question 26

Multiple Choice

When an individual deposits currency into a checking account:

• A)bank reserves increase, which allows banks to lend more and increases the money supply.
• B)bank reserves decrease, which reduces the amount banks can lend and reduces the growth of the money supply.
• C)bank reserves are unchanged.
• D)bank liabilities increase, which reduces the amount banks can lend and reduces the growth of the money supply.

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Definitions:

Gross Pay

The total amount of money earned by an employee before any deductions or taxes are taken out.

Deductions

Amounts subtracted from gross income to determine taxable income, including expenses, exemptions, and allowances.

Long-Term Liabilities

Financial obligations of a business that are due more than one year in the future.

Current Liabilities

Debts or obligations that are due to be paid within one year or within the normal operating cycle.