Under the modern system of fractional reserve banking, banks
A. keep cash reserves equal to only a fraction of their deposit liabilities.
B. loan out their excess reserves at interest, which is the key to their profitability.
C. are always potentially vulnerable to runs.
D. All of these responses are correct.
Answer: D
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Over the past fifty years, there has been substantial closure of the gap in real GDP per person between which of the following groups of countries?
A) the United States and Central and South America B) Africa and Western Europe C) Central and South America and Africa D) the United States and Japan
A movement downward along the demand for loanable funds curve occurs when
A) the expected profit from investment increases. B) business expectations become more optimistic. C) the real interest rate falls. D) the supply of loanable funds decreases.
A firm will employ an additional unit of labor as long as the employment of labor adds more to the firm's revenue than it does to the firm's:
a. product price. b. accounting profit. c. residual claim. d. cost.
There is a futures contract for the purchase of 100 bushels of wheat at $2.50 per bushel. At the end of the day when the market price of wheat increases to $3.00 per bushel:
A. the seller (short position) needs to transfer $50 to the buyer (long position). B. the buyer (long position) needs to transfer $50 to the seller (short position). C. nothing happens since with a futures contract all payments are made at the settlement date. D. nothing happens since marked to market adjustments only take place when the market price falls below the contract price.