Which Statement Is False

question 333

Multiple Choice

Which statement is false?

• A)Since some people choose to hold some of their currency,the deposit multiplier is lower than one divided by the reserve ratio.
• B)In times of inflation banks are quite likely to carry excess reserves.
• C)If banks choose to hold excess reserves;the deposit multiplier will be lower than expected.
• D)If there is a large drain of dollars to foreigners because of a large trade imbalance,the deposit multiplier will be lower than expecteD.

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Definitions:

Market Rate

The prevailing rate at which goods, services, or securities are bought and sold in the market.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Amortization

The gradual reduction of a debt or the spreading out of capital expenses for intangible assets over a specific period of time.

Bond Payable

A bond payable is a long-term liability where a borrower agrees to pay back a fixed amount of funds at a future date, along with periodic interest payments.