When Chartered Banks Use Excess Reserves to Buy Government Securities

question 14

Multiple Choice

When chartered banks use excess reserves to buy government securities from the public:

• A)new money is created.
• B)chartered bank reserves increase.
• C)the money supply falls.
• D)demand deposits decline.

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Definitions:

Accrual-based Net Income

The measure of a company's financial performance that includes earned revenues and incurred expenses that have yet to be received or paid.

Upstream Intra-entity Gross Profits

Upstream intra-entity gross profits are profits derived from transactions between a parent company and its subsidiary, where the subsidiary sells goods or services to the parent, requiring careful account adjustments when preparing consolidated financial statements.

Noncontrolling Interest

The portion of equity in a subsidiary not attributable directly or indirectly to the parent company.

Excess Amortization Expense

Excess Amortization Expense occurs when the amount of amortization expenses exceeding what is considered normal or necessary for an accounting period, often due to aggressive depreciation of assets.