The Reason That the Commercial Banking System Can Generate a Multiple

question 231

Multiple Choice

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

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

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Definitions:

Pure State Law

Legislation that is exclusively within the purview of an individual state’s legal system, without federal interference.

State Supreme Court

The highest court within a U.S. state, which typically has the final appellate jurisdiction over legal matters under the state's laws.

Intermediate Court of Appeal

A court that serves as an intermediary layer between the lower courts and the supreme or highest court of a jurisdiction, handling appeals.

State Supreme Court

the highest court in a U.S. state, with ultimate judicial authority to interpret and apply the state's constitution and laws.