If D Equals the Maximum Amount of New Demand-Deposit Money

question 120

Multiple Choice

If D equals the maximum amount of new demand-deposit money that can be created by the banking system on the basis of any given amount of excess reserves; E equals the amount of excess reserves; and m is the monetary multiplier, then

• A)m = E/D.
• B)D = E ×m.
• C)D = E − 1/m.
• D)D = m/E.

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Definitions:

Owner's Capital

The amount of equity a business owner has invested in the company, representing the owner's stake or ownership interest.

General Journal

A primary accounting record where all types of financial transactions are initially recorded using the double-entry bookkeeping method.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances before financial statements are prepared.

Cash Receipts Journal

An accounting ledger that tracks all cash inflows to a business, documenting sources of revenue or income.