The Fed Is Reluctant to Change the Required Reserve Rate

question 95

Multiple Choice

The Fed is reluctant to change the required reserve rate because:

• A)Changes in the rate have a small impact on the actual quantity of money
• B)The money multiplier is not impacted by the required reserve rate
• C)The time lag between changing the required reserve rate and changes in the money supply can be too long
• D)Small changes in the required reserve rate can have too big of an impact on the money multiplier and the level of deposits

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Definitions:

Capital Lease Obligation

A lease classified as a purchase agreement for accounting purposes, wherein the lessee records the leased asset as an owned asset on the balance sheet.

Capital Lease

A lease agreement that transfers substantially all the risks and rewards of ownership of the asset to the lessee, effectively treated as a purchase of the asset.

Periodic Cash Payments

Payments made regularly over a period of time, such as dividends or loan repayments.

Lease Rental Expense

An expense incurred from leasing an asset, which is typically recorded on a lessee's income statement.