Assume the Fed Creates Excess Reserves in the Banking System

question 98

Multiple Choice

Assume the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad. This situation is a problem of

• A) "putting all your eggs in one basket."
• B) "not in my backyard."
• C) "There ain't no such thing as a free lunch."
• D) "You can lead a horse to water, but you can't make it drink."

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Definitions:

Granite

A coarse-grained igneous rock composed mainly of quartz, feldspar, and mica, commonly found in the continental crust.

Coal Deposits

Accumulations of coal material in the Earth's crust, typically originating from plant matter compacted over millions of years.

Sedimentary Rocks

Layers of rock formed by the accumulation and consolidation of sediment, typically found on the Earth's surface.

Wyoming

A state in the western United States known for its wide-open spaces, mountains, and national parks.