when required reserves fall, banks cease granting new loans, which cause _________(assets/ liabilities) to decrease. This process is called deposit destruction. As a result, the money supply will decrease.
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- If the bank decides to cut down on interest expenses by reducing its dependence upon borrowed funds, what policy must the bank follow?When interest rates fall, the rates that a bank pays on deposits typically decline less than the interest rates that the bank earns on its loans and investments. Group of answer choices: True FalseIf a bank's credit ratings decrease, How does this affect borrowers, lenders, and financial institutions? What are the implications of this downgrade to the health of the financial system?
- The one major problem with fractional reserve system occurs when a. Borrowers are unable to pat back causing domino effect of bank failures b. The stock market drops in value rapidly(‘crashes’) leaving banks without any cash c. Too much money is created through the money multiplier effect which decreases the value of moneyThe balance of the cash is declining because Accounts Receivable is increasing due to collection rate. What can you suggest on this one ?A deposit institution can offset its liquidity risk to reduce its net deposit drains by reducing its assets through all of the following methods except: a. Borrowing funds or issuing equity. b. Calling back its loans. c. Use cash reserve. d. Selling securities.
- A commercial bank in Barbados faces serious liquidity problems; however, they have an asset that has the required value to meet their debt obligations. However, due to poor economic conditions, they may not get a buyer in time to purchase such an asset at their preferred price, so they may end up losing money for selling that asset lower than their preferred price, or if they choose not to sell the asset, they will not be able to meet their financial obligation. Which of the following strategy is best suited to manage the bank’s liquidity risk? Select one: a. Interest rate swaps b. Stress Tests c. Diversifying d. Hedgingwhat is ADVANTAGES AND DISADVANTAGES OF THIS MORATORIUM in banking to BANKS . Give an example. Consider a failing bank. How much is a deposit of$290,000 worth to the depositor. if the FDIC uses thepayoff method? The purchase-and-assumption method?Which method is more costly to taxpayers?
- A bank is insolvent if Group of answer choices its assets are less than its liabilities. it is unable to quickly convert assets to cash. its liabilities are less than its assets. most of its assets are loans.2. Substantial amount of credit losses is due to poor loan monitoring. In view of this, suggest how might one safeguard a bank's interest when providing loans.Which of the following decreases the likelihood of bank failures by keeping banks from making risky loans? FDIC insurance The discount window Reserve requirements Capital requirements