Which of the Following Statements Is False

question 12

Multiple Choice

Which of the following statements is false?

• A) The difference between total reserves and the monetary base is currency held by the nonbank public.
• B) The ability to alter the money supply and credit is based on the fact that our banking system does not utilize a fractional reserve system.
• C) The ability to predict M1 velocity, in addition to money supply changes, is important in achieving successful monetary policy making.
• D) A derivative deposit arising out of a loan from Bank A is transferred by check to Bank B, where reserve requirement are again imposed.

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Definitions:

Default Rates

The percentage of borrowers who fail to make required payments on their loans within a specified period.

Secondary Mortgage Market

The market where home loans and servicing rights are bought and sold between lenders and investors.

Financial Institution

An establishment that conducts financial transactions such as investments, loans, and deposits.

Household Debt/income Ratio

A measure comparing the debt level of a household to its income, indicating financial health and borrowing capacity.