Banks Are Able to Create Money Only When

question 15

Multiple Choice

Banks are able to create money only when

• A)interest rates are above 2%.
• B)the Fed sells U.S.government bonds.
• C)the reserve ratio is 100%.
• D)only a fraction of deposits are held in reserve.

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Definitions:

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security (usually equity) at a certain price before expiration.

Federally Registered

Designation indicating that an entity or activity has been officially recorded or acknowledged by the federal government.

Capital

Financial assets or resources that individuals or organizations use to fund their operations and invest in their future growth.

Company's Shares

Units of ownership interest in a corporation or financial asset, providing a portion of the company's profits and a claim on its assets to the shareholders.