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19.1Â Â Reserve Requirements 1) The primary function of reserve requirements is to serve as A) a source of bank liquidity. B) an instrument of monetary control. C) a means of reducing bank profits. D) a means of controlling the amount of currency in the banking system. 2) Since being originally set in 1913, bank reserve requirements have A) not been changed. B) been changed only once. C) been changed on numerous occasions. D) been changed on a daily basis. 3) Which of the following institutions is not subject to Federal Reserve’s reserve requirements? A) A state-chartered commercial bank B) A savings and loan association C) A money market mutual fund D) A credit union 4) Reserve requirements apply to A) life insurance companies. B) investment banks. C) credit unions. D) stock brokers. 5) Reserve requirements are highest for A) transactions deposits. B) bank borrowings from foreign branches. C) federal funds. D) business time deposits. 6) Reserve requirements apply to A) demand deposits. B) business-owned time deposits. C) business-owned savings deposits. D) Reserve requirements apply to all of the above. 7) Reserve requirements apply to A) FDIC-insured banks only. B) nationally chartered banks only. C) Federal Reserve member banks only. D) all commercial banks. 8) Excess reserves immediately increase if A) reserve requirements increase. B) reserve requirements decrease. C) the discount rate increases. D) the discount rate decreases. 9) __________ the required reserve ratio will __________ the potential for multiple expansion. A) Raising; increase B) Lowering; decrease C) Raising; decrease D) None of the above. 10) Excess reserves immediately decrease if A) reserve requirements increase. B) reserve requirements decrease. C) the discount rate increases. D) the discount rate decreases. 11) The deposit expansion multiplier is increased if the Federal Reserve A) buys government securities. B) sells government securities. C) lowers reserve requirements. D) raises reserve requirements. 12) The deposit expansion multiplier is decreased if the Federal Reserve A) buys government securities. B) sells government securities. C) lowers reserve requirements. D) raises reserve requirements.

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