If Banks Are Currently Holding Zero Excess Reserves and the Fed

question 95

Multiple Choice

If banks are currently holding zero excess reserves and the Fed raises the required reserve ratio,which of the following will happen?

• A) Banks will have a reserve deficiency.
• B) Banks will have positive excess reserves.
• C) Banks will begin to extend more loans.
• D) Banks will begin to extend more credit.
• E) b and d

---

Definitions:

Linear Demand Curve

A graphical representation of demand where the relationship between price and quantity demanded is a straight line, indicating constant marginal change.

Straight-Line

This term often refers to a method of depreciation in accounting where an asset loses value in equal increments over its useful life.

Downward-Sloping Demand Curve

A graphical representation showing the inverse relationship between the price of an item and the quantity demanded.

Price-Elasticity Coefficient

A measure indicating the responsiveness of the quantity demanded or supplied of a good to a change in its price.