Recall Application 2, "The Growth in Excess Reserves" to Answer

question 43

Multiple Choice

Recall Application 2, "The Growth in Excess Reserves" to answer the following questions:
-According to the application, what was the reason why banks started to hold more excess reserves after September 2008?

• A) The Fed allowed banks with little excess reserves to be taken over by banks with a large amount of excess reserves.
• B) The Fed lent lots of money to banks, which in turn did not lend any of it.
• C) The Fed started paying interest on bank reserves.
• D) The Fed required that banks hold excess reserves.

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Definitions:

Service Revenue

The income earned by a company for the services it has provided to its customers.

Normal Starting Balance

Normal Starting Balance refers to the initial amount of money in an account at the beginning of a financial period.

Debit Postings

Entries made on the left side of an account, increasing the balance of assets and expenses or decreasing liabilities and equity.

Credit Postings

Entries made on the credit side of an account ledger, indicating an increase in liability, revenue, or equity accounts, or a decrease in asset or expense accounts.