Statement I: If a Bank Has Negative Excess Reserves,then Its

question 77

Multiple Choice

Statement I: If a bank has negative excess reserves,then its required reserves are greater than its actual reserves.
Statement II: If a bank has negative excess reserves,it generally eliminates them by borrowing money in the Federal Funds market.

• A)Statement I is true and statement II is false.
• B)Statement II is true and statement I is false.
• C)Both statements are true.
• D)Both statements are false.

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Definitions:

Cost Driver

A factor that causes a change in the cost of an activity, such as machine-hours or labor hours, used in determining pricing and profitability.

Flexible Budgets

Budgets that adjust or flex with changes in the volume or level of activity.

Measure of Activity

An identifier used to gauge the level or intensity of activity within a certain process or system.

Planning Budget

A budget designed for a specific level of activity, often used as a tool for performance evaluation and cost management.