A Change in the Reserve Requirement Is Used Infrequently by the Fed

question 5

Multiple Choice

A change in the reserve requirement is used infrequently by the Fed because it

• A) is disruptive to the banking system.
• B) does not influence the money supply.
• C) does not affect bank reserves.
• D) does not affect the money multiplier.

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Definitions:

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders but reinvested in the business or kept as a reserve.

Par Value

The face value of a bond or stock as stated by the issuer, which may differ from its market value.

Cash Dividend

A payment made by a company out of its earnings to its shareholders, usually in the form of cash.

Stock Dividend

A dividend payment made in the form of additional shares rather than a cash payout.