By Requiring Banks to Keep More Money in Their Vaults

question 52

Multiple Choice

By requiring banks to keep more money in their vaults, the Federal Reserve Board can effectively pull money out of the economy, thereby slowing ________. Conversely, by loosening reserve requirements, the Federal Reserve Board can pump more money into the economy, which usually leads to ________ interest rates and ________ access to loans.

• A) inflation; lower; easier
• B) inflation; higher; harder
• C) deflation; lower; easier
• D) deflation; higher; harder
• E) inflation; higher; easier

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Definitions:

Cash Refund

Money returned to a purchaser as reimbursement for overpayment, returns, or dissatisfaction with goods or services.

Discount Period

The time frame within which a payment can be made by a buyer to a seller at a reduced price, typically to encourage early payment.

Perpetual Inventory System

An accounting method that records inventory purchases and sales in real-time, maintaining continuous, up-to-date inventory levels.

Liability

A financial obligation or debt owed by a company to another entity, to be paid in the future.