If Banks Do Not Have Enough Reserves to Satisfy the Reserve

question 139

Multiple Choice

If banks do not have enough reserves to satisfy the reserve requirement,they can

• A)Buy securities.
• B)Pay off discount loans at the Federal Reserve bank.
• C)Lend additional reserves in the federal funds market.
• D)Sell securities.

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Definitions:

Credit Balance

A balance in a financial account that indicates the amount of money owed to a creditor or the account holder; it is the opposite of a debit balance.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances from temporary accounts to permanent accounts, preparing the books for the next period.

Temporary Accounts

Revenue, expense, and drawing accounts that are closed to the owner’s capital account at the end of the accounting period.

Post-Closing Trial Balance

A listing of all accounts and their balances after the closing entries are made, ensuring debits equal credits.