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Question

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Refer to Table 16-4. If the bank faces a reserve requirement of 10 percent,   then the bank

A.is in a position to make a new loan of $10,000.
B.has fewer reserves than are required.
C.has excess reserves of $12,500.
D.None of the above is correct

2.

When the Federal Reserve conducts open-market operations to increase the money supply, it :

      A.  redeems Federal Reserve notes.

       B. buys government bonds from the public.

       C. raises the discount rate.

       D. decreases its lending to member banks

When the Fed makes open-market purchases bank ?  

      A.  withdrawals and lending increase.

       B. withdrawals increase and lending decreases.

       C. deposits and lending increase.

       D. deposits increase and lending decreases

Explanation / Answer

B

C

A

A

50

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