When the Required Reserve Ratio Is Increased, the Excess Reserves

question 218

Multiple Choice

When the required reserve ratio is increased, the excess reserves of member banks are

• A)reduced, but the multiple by which the commercial banking system can lend is unaffected.
• B)reduced and the multiple by which the commercial banking system can lend is increased.
• C)increased and the multiple by which the commercial banking system can lend is increased.
• D)reduced and the multiple by which the commercial banking system can lend is reduced.

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Definitions:

Convertible Preferred Stock

A type of preferred stock that holders can convert into a predetermined number of common shares, often at a set price.

Preferred Stock

A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock, usually with fixed dividends.

Common Stock

Shares of ownership in a corporation that entitle holders to vote at shareholder meetings and receive dividends.

Convertible Preferred Stock

A type of preferred stock that holders can convert into a specified number of common shares, usually at any time after a predetermined date.