The Maximum Amount by Which the Entire Banking System Can

question 121

Multiple Choice

The maximum amount by which the entire banking system can create money is equal to:

• A)a fraction of its excess reserves.
• B)a fraction of its required reserves.
• C)a multiple of its total reserves.
• D)a multiple of its excess reserves.
• E)its excess reserves.

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Definitions:

Intercompany Bond Sale

Transactions involving the sale of bonds between companies that are part of the same corporate group.

Coupon Rate

This is the annual interest rate paid by bond securities to its holders, typically expressed as a percentage of the bond's face value.

Bond Maturity

The date on which a bond's principal amount is paid back to bondholders, also marking the end of the bond's interest payments.

Bond Discount

The difference between the face value of a bond and its selling price when the bond is sold for less than its face value.