ECONOMICS 205 FINAL EXAM REVIEW Questions and Answers 2023 Grade A+

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When the people most likely to apply for loans are the people who are the worst credit risks, the problem is ________. - -adverse selection -If a business firm takes out a loan from a bank, but doe... s not use the funds as the bank intended, the problem is ________. - -moral hazard -Accounting rules require that a bank's _____ equals its ______. - -assets; liabilities plus equity capital -A banks reserves equal its ___________. - -vault cash plus deposits at the Federal Reserve. -The reserve requirement is 10 percent of deposits. If a bank has $10 million in deposits and $1 million in total reserves, how many excess reserves does the bank have? - -$0 -A bank with no excess reserves ___________. - -cannot make any new loans -Loans are a(n) __________ for the bank and a(n) __________ for you. - -asset; liability -The federal funds rate is the interest rate in the market for ___________. - -loans of reserves between banks [Show More]

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