The most profitable way for a bank to maintain the minimum required reserves is to hold large amounts of excess reserves.
Answer the following statement true (T) or false (F)
False
Large amounts of excess reserves do not help a bank; they represent resources that could be used for loans-thus too many excess reserves only decrease the profitability of the bank.
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During the sixteenth century, Spanish conquistadors like Hernando Cortes overwhelmed the Aztecs and other indigenous peoples in America by pillaging their cities, and taking their gold and silver. The gold and silver was sent back to Spain, causing its
money supply to increase tenfold. Assuming V remained stable and Q increased slightly, what do you think happened to prices in Spain during this period?
Flexible exchange rates occur when
A) speculators bet that a currency will soon depreciate. B) governments and central banks spend foreign exchange to prop an exchange rate at a certain level. C) no one knows the true value of a currency. D) exchange rates are determined by forces of supply and demand.