To Prevent Banks from Using Excess Reserves to Make Loans

question 2

Multiple Choice

To prevent banks from using excess reserves to make loans that would increase the money supply, the Federal Reserve could conduct open-market ______ and _____ the interest rate paid on bank reserves.

• A) purchases; raise
• B) purchases; lower
• C) sales; raise
• D) sales; lower

---

Definitions:

Certificate of Authority

A document issued by a state government granting a company permission to do business in that state as a foreign (out-of-state) entity.

Charter

A charter is a legal document that establishes a corporation or municipality, outlining its rights, privileges, and operations.

Promoters of a Corporation

Individuals or entities involved in the creation and organization of a corporation, including raising capital and completing legal formalities before registration.

Formal Documents

Official papers that follow a specific format or standard, often used for legal, official, or ceremonial purposes.