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drill and practice lesson 11 - (1)The money multiplier...

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(1)The money multiplier process also works in reverse when a loan is repaid since fewer checkable funds are then available to generate excess reserves. True As a result of the rising interest rates in this example, Businesses had to reduce their Investment Spending on _____________________. A improved products, training and facilities 3)Most of a bank’s loans are made to its own customers and are deposited in their ________________. A checking accounts (4)The purpose of the legal reserve is to guarantee the solvency (avoid the bankruptcy) of a bank. False In the longer run one of the risks of the Fed’s “tight money” approach is that ___________________________ because of the declining productivity caused by the forced reductions in Investment Spending. A people’s standard of living may be reduced (6)Banks play a very important role by providing savers a channel for their funds to be deposited and held safely while at the same time providing those funds as investment into the process of economic growth. True (7)________________ invested or made loans with 95 percent of the deposits that were being held. D Goldsmiths (8)A bank becomes a “going concern” (operating business) after meeting all regulatory requirements of the federal and state governments and the _______________. D Federal Reserve (9)The equation of Legal Reserves - Required Reserves = ____________ Reserves describes the relationships of fractional reserve banking.
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A Excess (10)The process of controlling the money supply is a tremendous responsibility for the Fed since the health of the ___________ is at stake.
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