If Banks Are Currently Holding Zero Excess Reserves and the Fed

question 67

Multiple Choice

If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio,which of the following will happen?

• A) Banks will have a reserve deficiency.
• B) Banks will have positive excess reserves.
• C) Banks will extend fewer loans.
• D) Banks will call in some of their loans to meet the reserve deficiency.

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Definitions:

Critical Factors

Essential elements or conditions necessary for the success of a business or project.

New Business

A venture that has been recently established, entering the market with fresh offerings of products or services.

Process Layout

An arrangement of resources in a manufacturing or service setting where similar processes or functions are grouped together, which is beneficial for handling a variety of products or services.

Product Layout

An arrangement of machinery, equipment, and staff within a production facility where the workstations and equipment are ordered by the sequence of operations.