Which of the Following Statements BEST Describes Why a Decrease

question 109

Multiple Choice

Which of the following statements BEST describes why a decrease in reserve requirements often results in an increase in the money supply?

• A) A decrease in reserve requirements gives banks more money to better determine their interest rates.
• B) A decrease in reserve requirements gives banks more money to pay off their debts.
• C) A decrease in reserve requirements gives banks more money to lend out.
• D) A decrease in reserve requirements gives banks more money to offset lower interest rates.
• E) A decrease in reserve requirements gives banks more money to reward their employees for meritorious financial ventures.

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Definitions:

Educational Institutions

Organizations dedicated to the instruction and training of students in various fields of study.

Fully-Funded Pension Plan

A pension plan that has enough assets to provide for all accrued benefits owed to participants.

Equities

Shares of ownership in a company, representing a claim on part of the company's assets and earnings.

Contingent Immunization

A mixed passive-active strategy that immunizes a portfolio if necessary to guarantee a minimum acceptable return but otherwise allows active management.