Which of the Following Is False

question 64

Multiple Choice

Which of the following is false?

• A)​The Fed controls the supply of money, even though privately owned commercial banks actually create and destroy money by making loans.
• B)​With a 10% required reserve ratio, a $10,000 cash deposit in a bank would result in an increase in the bank's excess reserves by $1000.
• C)​With a 10% required reserve ratio, a $1,000 bond purchase by the Fed directly creates $1,000 in money in the form of bank deposits, and indirectly permits up to $9,000 in additional money to be created through the multiple expansion in bank deposits.
• D)​When the Fed sells government bonds, it will tend to cause a multiple contraction of bank deposits.

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Definitions:

Financial Statement

A formal record of the financial activities and position of a business, person, or other entity.

Permanent/Temporary

distinguishes between accounts or actions that exist indefinitely (permanent) or for a specific duration (temporary).

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer temporary accounts to permanent accounts, preparing the books for the next period.

Worksheet Income Statement

is a financial statement that preliminarily combines income and expenses data in worksheet form to calculate net income or loss.