If the Federal Reserve Increases the Interest Rate on Bank

question 196

Multiple Choice

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold

• A)fewer reserves, so the reserve ratio will fall.
• B)fewer reserves, so the reserve ratio will rise.
• C)more reserves, so the reserve ratio will fall.
• D)more reserves, so the reserve ratio will rise.

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Definitions:

Broker Fee

A charge or commission a broker commands for their service in facilitating transactions, such as buying or selling securities.

Discount Broker

A broker who trades stocks, but does not give investment advice.

Net Proceeds

The total amount received from a sale or transaction after deducting all related expenses and costs.

1% Commission

A fee or charge for services, typically in sales or financial transactions, that is equal to 1% of the transaction's total value.