If There Are No Excess Reserves in the Banking System

question 92

Multiple Choice

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have __________,which they can use to extend loans and create new __________.

• A) positive excess reserves; checkable deposits
• B) negative excess reserves; currency
• C) positive excess reserves; currency
• D) more vault cash; checkable deposits
• E) none of the above

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Definitions:

Activation Energy

The smallest quantity of energy necessary to start a chemical reaction.

Equilibrium

A state in a chemical reaction where the rates of the forward and reverse reactions are equal, leading to no overall change in the concentration of reactants and products.

Catalyst

A substance that increases the rate of a chemical reaction without being consumed or permanently altered in the process.

Equilibrium Constant

A numerical value that expresses the ratio of concentrations of products to reactants at equilibrium for a reversible chemical reaction at a constant temperature.