What Is the Immediate Effect When Bank a Lends $1

question 111

Multiple Choice

What is the immediate effect when Bank A lends $1, 000 to a local business?

• A)The money supply increases by $1, 000
• B)The money supply decreases by $1, 000
• C)Bank A's liability increases by $1, 000
• D)Bank A's excess reserves increase by $1, 000
• E)Bank A's demand deposits decrease by $1, 000

---

Definitions:

FASB

The Financial Accounting Standards Board, an independent organization responsible for establishing accounting and financial reporting standards in the United States.

Accounting Standards

Formal conventions, rules, and guidelines that govern how financial statements are prepared and presented to ensure uniformity and comparability.

Accumulated Profits

The retained earnings of a company, representing the net income that has not been distributed to shareholders as dividends and is reinvested in the business.