1) If a bank has excess reserves greater than the amount of a deposit outflow, the outflow will result in equal reductions in
A) deposits and reserves.
B) deposits and loans.
C) capital and reserves.
D) capital and loans.
2) A $5 million deposit outflow from a bank has the immediate effect of
A) reducing deposits and reserves by $5 million.
B) reducing deposits and loans by $5 million.
C) reducing deposits and securities by $5 million.
D) reducing deposits and capital by $5 million.
3) Bankers” concerns regarding the optimal mix of excess reserves, secondary reserves, borrowings from the Fed, and borrowings from other banks to deal with deposit outflows is an example of
A) liability management.
B) liquidity management.
C) managing interest rate risk.
D) managing credit risk.
4) If, after a deposit outflow, a bank needs an additional $3 million to meet its reserve requirements, the bank can
A) reduce deposits by $3 million.
B) increase loans by $3 million.
C) sell $3 million of securities.
D) repay its discount loans from the Fed.