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:

Facility Closure

The process of permanently shutting down operations at a business location, often involving asset disposal and employee layoffs.

Proprietary Funds

Funds typically used in governmental accounting to account for business-like activities, where the government intends to recover costs through user charges.

Financial Statement

A formal record of the financial activities and position of a business, person, or other entity.