Practice Questions
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If the Federal Reserve decides to lower the discount rate, how might this action affect a bank's reserve ratio and its ability to lend money?
When the Fed cuts the discount rate, banks can borrow cheaper from the Fed. Other options are incorrect because Some think lowering the discount rate ...
If a central bank raises the reserve requirement for commercial banks, what will likely occur in the interbank lending market and how might this affect the overall money supply in the economy?
When reserve requirements rise, banks must hold more deposits in reserve, so less money is left to lend. Other options are incorrect because Some thin...
If a bank's required reserves increase due to a rise in the reserve requirement set by the Federal Reserve, what immediate impact might this have on the bank's lending capacity?
When the reserve requirement rises, the bank must keep more money on hand. Other options are incorrect because Higher reserves do not create new money...
If a bank has $1 million in deposits and the reserve requirement is set at 10%, how much must the bank keep in reserve?
The reserve requirement says the bank must hold a portion of deposits safely. Other options are incorrect because A 200,000 reserve would mean the ban...
If a bank is required to maintain a reserve ratio of 12% and it has total deposits of $2 million, how much must it hold in reserve?
The reserve ratio tells how much of the deposits the bank must keep as reserves. Other options are incorrect because It mixes the ratio with a differe...
Order the following steps that a commercial bank must follow to determine its lending capacity based on reserves: 1) Calculate required reserves, 2) Assess total deposits, 3) Identify excess reserves, 4) Decide on lending limits.
First the bank looks at how much money customers have deposited. Other options are incorrect because This choice assumes the bank can calculate how mu...
A local bank has determined that it has $1 million in total deposits. According to the reserve requirement set by the central bank, the required reserve ratio is 10%. The bank has $120,000 in reserves. How should the bank adjust its reserves to comply with the reserve requirement, and what does this indicate about its capability to lend?
The bank must keep $100,000 in reserves because 10% of $1 million is $100,000. Other options are incorrect because It says the bank needs only $100,00...
In the context of commercial bank reserves, the minimum amount of reserves that a bank must hold to meet regulatory requirements is known as __________.
Required reserves are the minimum amount a bank must keep, as set by regulators. Other options are incorrect because Excess reserves are the extra cas...
Master Commercial Bank Reserves
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