Answer the following statements true (T) or false (F)
1. When a bank buys government securities from the Fed, then the bank's ability to "create money" will be reduced.
2. A check for $10,000 drawn on Bank A and deposited at Bank B will increase the excess reserves in Bank B by $10,000.
3. The federal funds rate is the interest rate that the Fed charges banks for its loans to them.
4. One bank can borrow reserves from another bank, and the interest on the loan is called the federal funds rate.
5. If a bank has excess reserves of $100,000, then it can lend out only up to $100,000; but if the banking system has excess reserves of $100,000, then the system can make additional loans totaling more than $100,000.
1. True
2. False
3. False
4. True
5. True
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