Which of the Following Is Not a Consequence of the Fed

question 10

Multiple Choice

Which of the following is not a consequence of the Fed changing the reserve requirement?

• A)Changes in the ratio are easily incorporated into banks' routine management.
• B)Decreasing the ratio will increase excess reserves.
• C)Increasing the ratio will decrease the amount of reserves banks have to loan.
• D)Changes in the ratio effectively places a tax on banks' deposit taking and lending activities.

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Definitions:

Allowance Method

An accounting technique used to estimate and account for doubtful accounts, reducing accounts receivable to their net realizable value.

Direct Write-off Method

A method used in accounting to write off bad debt expenses when a company decides an account is uncollectible, directly affecting the income statement.

Bad Debts Recovered

Income received from previously written-off accounts receivable that were unexpectedly paid by the debtor.

Direct Write-off Method

An accounting approach where uncollectible accounts receivable are directly written off against income at the time they are deemed unrecoverable.