QUESTION 29 Banks normally hold few excess reserves because this practice is: e

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QUESTION 29 Banks normally hold few excess reserves because this practice is: e subject to an excess reserves tax. O not profitable. O against Fed policy. O illegal QUESTION 30 If there is a recession, the Fed would most likely e encourage banks to provide loans by lowering the discount rate. encourage banks to provide loans by raising the discount rate restrict bank lending by lowering the discount rate @ restrict bank lending by raising the discount rate restrict bank lending by lowering the federal funds rate QUESTION 31 The cost to a member bank of borrowing from the Federal Reserve is called the reserve requirement price of securities in the open market discount rate yield on government bonds Click Save and Submit to save and submit Ctiek save all Ancers to sane alnuers

Explanation / Answer

29). B. Because excess reserves means money that is not loaned out and doesnot make any return

30)A. During recession, fed encourage banks to loan out by lowering rate.

31)C. Discount rate is the rate at which fed provide loan to commercial bank.

32)C. Fed fund market is the market where banks borrow from each other.

33)D. Quantity theory assumes MV=PY where Y is constant at full employment output

34)B. Because Md=KPY-hi

35)E. Decrease in MS increases i which decreases investment and AD

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