Which of the Following Explains Why Banks Try to Keep

question 119

Multiple Choice

Which of the following explains why banks try to keep their holdings of excess reserves low?

• A)To maximize profits.
• B)To keep the money multiplier low.
• C)To escape Fed penalties.
• D)To please bank examiners.

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Definitions:

Bond Prices

The amount of money for which bonds are bought and sold in the market, influenced by factors such as interest rates, supply, and demand.

Interest Rates

The expense incurred by a borrower, quantified as a percentage of the principal, for accessing a lender's assets.

Yield

The income return on an investment, such as the interest or dividends received, expressed as a percentage of the investment's cost.

Coupon Rate

An annual interest percentage a bond generates, reflected against its original price.