The Fed's Power to Set the Required Reserves of Commercial

question 113

Multiple Choice

The Fed's power to set the required reserves of commercial banks:

• A) provides a certain source of interest income for commercial banks.
• B) allows the Fed to control the lending ability of commercial banks and, thereby, control the money supply.
• C) prevents banks from hoarding too much vault cash.
• D) prevents commercial banks from earning excess profits.

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Definitions:

Sensory Adaptation

A change over time in the responsiveness of the sensory system to a constant stimulus, often leading to a decrease in sensitivity to that stimulus.

Prolonged Stimulation

Continuous or extended exposure to a stimulus over a considerable period of time.

Neurotransmitter

Chemical messengers that transmit signals across a chemical synapse, from one neuron (nerve cell) to another 'target' neuron, muscle cell, or gland cell.

Amplitude

Amplitude refers to the magnitude or strength of a fluctuating signal, such as sound, light, or electrical signal, often measured from its baseline to its peak.