Question

18. The First National Bank of Erie must meet a 5 percent required reserve ratio. If the bank has no excess

reserves initially and $5,000 of new cash is deposited in the bank, then the bank can increase its loans by a maximum of:

A. $25,000.

B. $1,000.

C. $4,750.

D. $100,000.

E. $5,000.

19. The federal funds rate is the interest:

A. rate at which the Fed lends to commercial banks.

B. rate at which commercial banks lend to each other.

C. yield on long-term government bonds.

D. rate at which commercial banks lend to the public.

E. rate at which the Fed lends to the U.S. Treasury.

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