The Reason That the Commercial Banking System Can Generate a Multiple

question 95

Multiple Choice

The reason that the commercial banking system can generate a multiple expansion or contraction of the money supply is that

• A)banks desire to hold only a fraction of their deposit liabilities as reserves.
• B)most banks maintain a relatively large stock of excess reserves.
• C)banks hold reserves equal to their net worth.
• D)banks generally have surplus funds on deposit with other banks.

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Definitions:

Investing Activity

Transactions involving the purchase and sale of long-term assets and other investments, part of a company's cash flow statements.

Land

Land is considered a fixed asset or real property, not depreciable under accounting rules, used by businesses for operations or investment.

Cash Inflow

Money received by a business from various sources including sales, investments, financing, and more.

Indirect Method

A method of preparing a statement of cash flows in which net income is adjusted for items that do not affect cash, to determine net cash provided by operating activities.