When Banks Hold a Large Amount of Excess Reserves, Which

question 230

Multiple Choice

When banks hold a large amount of excess reserves, which of the following tools would the Fed most likely use when it wants to increase the interest rate?

• A) raising the reserve requirement
• B) raising the interest rate it pays to banks on their reserves
• C) raising the discount rate
• D) making an open market purchase

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Definitions:

Multinational Corporation

An enterprise operating in several countries but managed from one (home) country, typically having a centralized head office where they coordinate global management.

Host Country

The country in which a multinational company operates a facility outside of its home base, subject to the host country's laws, regulations, and cultural expectations.

World Trade Organization

The World Trade Organization (WTO) is an international organization that regulates and facilitates international trade between nations, aiming to ensure smooth, fair, and free trade.

International Trade

The exchange of goods, services, and capital across international borders or territories, fostering global economic integration.