Which of the Following Is a Valid Characterization of the Borrower's

question 39

Multiple Choice

Which of the following is a valid characterization of the borrower's promise to repay a loan and the lender's collateral or security if the borrow fails to repay?

• A) They are the major elements of the credit agreement.
• B) Each refers to any interest in property that is of value to a lender.
• C) Each reflects the need for extensive security due to uncertain value.
• D) They are the lender's value in any property interest.

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Definitions:

Required Reserve Ratio

The fraction of deposits that banks are required to keep on hand and not loan out, used by central banks to control the amount of money in circulation.

Legal Reserves

Reserves that depository institutions are allowed by law to claim as reserves; vault cash and deposits held at Federal Reserve district banks.

Excess Reserves

Excess Reserves are the reserves that banks hold over and above the legal or required minimum they need to keep against deposits.

Open Market Purchase

A monetary policy operation where a central bank buys government securities from the market in order to inject liquidity and encourage lending and investment.