When the Fed Increases the Reserve Requirement, Banks

question 36

Multiple Choice

When the Fed increases the reserve requirement, banks

• A) must increase the dollar volume of loans they make to customers.
• B) must pay more to borrow from the Fed.
• C) have fewer funds available for lending.
• D) will find their balance sheets temporarily out of balance.

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Definitions:

High-involvement Product

A product that requires significant customer thought and research before purchase due to its higher price or personal importance.

Running Shoes

Footwear designed to enhance comfort, support, and performance specifically for the activity of running.

New Car

A New Car is a vehicle that has not been previously registered and is purchased directly from a dealership or manufacturer.

Wholesaling

The sale of goods to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers.