1. A bank can safely reduce its amount of reserves if: A. there is little chance
ID: 1220975 • Letter: 1
Question
1. A bank can safely reduce its amount of reserves if:
A. there is little chance that its depositors will make large withdrawals B. it is balanced by a large amount of loans C. the federal funds rate is very high D. interest rate fall
2. congress passed the Credit Card Accountability and Responsibility, and Disclousure Act in order to:
A. restrict the fee imposed on credit card users. B. Require credit card users to reduce the use of their credit cards C. require the banks to provide credit cards to students and other customers with a low income. D. prevent banks from imposing a fee when transferring a balance from another credit card
3. Banks often have to sell their loans at fire-sale prices
A. because they know more about the borrower than the institution buying the loan B. when their assets exceed their net worth C. because they wish to increse their profits D. they wish to increse their borrowing from the Ferderal Reserve
4. The increased use of credit card has led to:
A. an increase us of ATM cards B. a decline in consumer loans C. an increase in consumer loans D. higher rate of inflation
5. With the decline in commercial and investment loans has come an increase in
A. federal fund loans B. car loans C. real estate loans D. all of the answer are correct
Explanation / Answer
1. A. there is little chance that its depositors will make large withdrawals
2. A. restrict the fee imposed on credit card users.
3. B. when their assets exceed their net worth because by lending at fire-sale price also banks earn profit.
4. C. an increase in consumer loans
5. A. federal fund loans as car loan and real estate loans are the types of investment loans. So, decrease in investment loan lead to reduction in the car and real estate loan.
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