If the Fed Reduces the Required Reserve Ratio

question 48

Multiple Choice

If the Fed reduces the required reserve ratio,

• A)excess reserves will increase.
• B)excess reserves will decrease.
• C)total reserves will increase.
• D)total reserves will decrease.

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Definitions:

Registered Market Makers

Entities authorized to both buy and sell specified securities on a continuous basis to maintain liquidity in the financial markets.

Short Sale

This is a trading or investment strategy where an investor sells a security they do not own, expecting its price to decline.

Margin Required

The minimum amount of funds that must be deposited with a broker when borrowing to buy securities or entering into a futures contract, serving as collateral.

Over-the-counter

A decentralized market, without a central physical location, where participants trade stocks, commodities, currencies, or other instruments directly between two parties and not through a central exchange.