One Method That May Be Employed by Banks to Lower

question 127

Multiple Choice

One method that may be employed by banks to lower required reserves is to

• A)transfer deposits offshore on Friday and to transfer them back on Monday.
• B)convert demand deposits into MMDA accounts on Friday and reverse the transfer the following Monday.
• C)rely more heavily on zero explicit interest-rate deposits.
• D)delay posting deposits made on Friday until the following Monday.
• E)do nothing, because reserve requirements cannot be avoided.

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Definitions:

Owns the Asset

Refers to having legal title or right to possession of an asset, implying control over its use and the benefits it produces.

Lessee

The party in a lease agreement who pays the lessor for the use of an asset.

Lessor

The party in a lease agreement who owns the leased asset and grants the lessee the right to use that asset in exchange for periodic lease payments.

Deductibility

The ability of an expense or contribution to be subtracted from gross income, reducing the taxable income and tax liability.