When the Fed Extends a $100 Discount Loan to the First

question 65

Multiple Choice

When the Fed extends a $100 discount loan to the First National Bank,reserves in the banking system

• A)increase by $100.
• B)increase by more than $100.
• C)decrease by $100.
• D)decrease by more than $100.

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Definitions:

Disbursement of Funds

The act of paying out money from a fund or account to cover expenses or investments.

Collateral Position

Collateral is property or assets that a borrower offers to a lender as security for a loan, which can be taken by the lender if the borrower fails to repay.

Stretching Payables

Paying invoices after they’re due according to the terms of sale. Also called leaning on the trade.

Short-term Loans

Loans that are scheduled for repayment within a short timeframe, usually less than one year.