Which of the Following Explains Why a Bank Holds Reserves

question 443

Multiple Choice

Which of the following explains why a bank holds reserves?
I. Banks are required by law to hold reserves.
II. To meet depositors' currency withdrawals
III. To use them to make loans to households

• A) I only
• B) II only
• C) I and II
• D) I, II, and III
• E) I and III

Understand the impact of macroeconomic policies on economic growth.

Comprehend the principles and debates surrounding stabilization policy.

Recognize the challenges and implications of time inconsistency in policymaking.

Grasp the effects of fiscal policies, including tax cuts and government expenditures, on the economy.

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Definitions:

Binding Price Ceiling

A legally imposed price limit that is set below the equilibrium price, leading to a shortage as demand exceeds supply at that price level.

Graph (a)

A graph is a visual representation of relationships between two or more variables or sets of data, often using lines, bars, or points in a two-dimensional or three-dimensional space.

Price Control

Government-imposed limits on the price charged for commodities and services in an effort to curb inflation or ensure affordability.

Public's Need

Refers to the essential goods, services, and conditions necessary for the well-being of a community or population.