A Bank Finds Itself Short of Required Reserves and Therefore

question 60

Multiple Choice

A bank finds itself short of required reserves and therefore borrows from another commercial bank. The interest rate on this loan is

• A) zero.
• B) the prime rate.
• C) the discount rate.
• D) the federal funds rate.
• E) the required reserve ratio.

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Definitions:

Apparent Authority

A situation where a third party reasonably believes that an agent has the authority to act on behalf of the principal, even if such authority has not been formally granted.

Terminate

To bring an end to something, such as a contract, employment, or operation, either by mutual agreement, fulfillment of terms, or through unilateral action.

Notify

To formally or officially inform someone of something.

Emergency Powers

Special, temporary powers granted to governments to handle crises or emergencies, allowing deviations from normal procedures or laws.