Suppose a European Bank Has Excess Reserves

question 101

Multiple Choice

Suppose a European bank has excess reserves.It can either lend them or deposit them overnight in the ECB's Deposit Facility.Ignoring any question of risk, if the bank deposits the funds instead of lending them it must be true that the rate on the loan was less than the:

• A)ECB target refinancing rate less 100 basis points
• B)ECB target refinancing rate
• C)Minimum bid rate
• D)Minimum bid rate less 50 basis points

---

Definitions:

More Mechanistic

Describing an organization or system that is highly structured and operates in a rigid and controlled manner.

Essential Tension

The necessary pressure or conflict arising from the coexistence of contrasting and sometimes conflicting forces, ideas, or requirements.

Existing Technologies

Currently available tools, machines, devices, or methods employed in the creation, maintenance, or improvement of products or services.

Innovating

Innovating involves introducing new ideas, methods, or products to effect positive change or improvement.