Q30. The higher the reserve requirement, a. the more the money supply can expand
ID: 1199893 • Letter: Q
Question
Q30. The higher the reserve requirement,
a. the more the money supply can expand
b. the more interest the bank will earn on its reserve account
c. the less the money supply can expand
d. both the more the money supply can expand and the more interest the bank will earn on its reserve account
Q31. If depositors withdraw their funds and create a shortage of reserves, bankers
a. have no alternative but to call in outstanding loans
b. can borrow reserves from the Fed
c. must close their operations until their reserves increase
d. must sell bank stock to replenish reserves
Q32. If a bank has excess reserves,
a. its reserves are greater than its liabilities
b. it can make a loan if it wishes
c. it cannot make a loan if it wishes
d. it must borrow from the Fed
Q33. Which of the following is most influenced by changes in the discount rate?
a. the interest rate paid on savings
b. the commercial loan rate
c. the installment loan rate
d. the mortgage loan rate
Q34. The Federal Reserve System is built around
a. four regional banks
b. six regional banks
c. twelve district banks
d. one bank with several branches
Q35. The interest rate at which banks borrow excess reserves from each other is known as the
a. prime rate
b. federal funds rate
c. discount rate
d. T-bill rate
Q36. If the U. S. government increases spending, the U. S. Treasury
a. has the legal right to issue currency to pay for the spending
b. does not have the legal right to issue currency to pay for the spending
c. usually pays for the spending by selling bonds directly to the Fed
d. seldom pays for the spending by selling bonds to the public
Q37. Forces within the economy that naturally tend to counteract recessions and inflation are known as
a. discretionary stabilizers
b. automatic stabilizers
c. demand-management policies
d. fiscal dividends
Explanation / Answer
Q30 Answer will be c because as the more reserve is required to be made less amount of money will left with the bank to lend them to the customers and less amount of money will be available for circulation this will reduce the money supply in the economy.
Q31 Answer will be b because depositors withdraw their funds which is a liability towards the bank and it has no other option to fullfill its liabilities. so the commercial banks have to take loan from the central bank i.e Fed to pay the deposits of the funds of the customers.
Q32 Answer will be a because banks may choose to hold their excess reserves in order to facilitate upcoming transactions or meet contractual clearing balance requirements and hences it will lie to have its reserves greater than its liabilities.
Q33 Answer will be b because discount rate is the rate at which commercial bank take loan from the central bank so if discount rate will change it will affect the commerial loan rate.
Q35 Answer will be c because The discount rate is the interest rate charged when member banks borrow directly ... bank typically borrows money from other banks and pays the federal funds rate.
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