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CIMAPRA17-BA1-1 Exam - Topic 1 Question 48 Discussion

Commercial banks can create credit because:
D) customers only want some of their deposits in the form of cash in any given period.
A) central banks are 'lenders of last resort' and provide commercial banks with cash when needed
B) banks are required to hold enough capital to meet bad debts.
C) banks hold accounts at the central bank which are available as cash.

CIMAPRA17-BA1-1 Exam - Topic 1 Question 48 Discussion

Actual exam question for CIMA's CIMAPRA17-BA1-1 exam
Question #: 48
Topic #: 1
[All CIMAPRA17-BA1-1 Questions]

Commercial banks can create credit because:

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Suggested Answer: D

by Thurman at May 09, 2022, 05:51 PM

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Kimbery
10 months ago
I thought it was more about capital requirements, though.
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Crista
10 months ago
Central banks do act as lenders of last resort, that's a key point!
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Antonio
11 months ago
Wait, are we sure about that? Seems a bit off.
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Tina
11 months ago
Totally agree, it's all about how much cash people want at once!
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Kristin
11 months ago
Banks can create credit because of customer deposit behavior.
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Hassie
11 months ago
Okay, let me think this through. I think the key is to get the profile set up properly as a business account first, so I'm going to go with switching to a business profile.
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Aretha
11 months ago
I'm a bit confused on the difference between the public and private keys here. Do we need both or just one of them? I'll have to review my notes to make sure I understand this properly.
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Cassi
11 months ago
I remember discussing how finance leases can keep liabilities off the balance sheet, which could help with gearing ratios. Is that what they mean by "off-balance sheet"?
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Aleta
11 months ago
This one seems pretty straightforward. The production manager's salary would be an indirect labor cost, so I'm going with option C.
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