A Change in the Reserve Ratio Will Affect Both the Amount

question 289

True/False

A change in the reserve ratio will affect both the amount of the banking system's excess reserves and the multiple by which the system can lend on the basis of excess reserves.

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Definitions:

Hedge Ratio

The ratio of the size of a position in a hedging instrument to the size of the position being hedged, used to minimize risk.

Dollar Exposure

The extent to which a company or investor is affected by changes in the value of the U.S. dollar against foreign currencies.

Call Delta

An option's sensitivity measure that indicates how much the price of the call option is expected to change in response to a one-point change in the price of the underlying asset.

Two-State

Usually references a model involving two possible outcomes or states, often used in finance to model investment under uncertainty.