1) Banks that suffered significant losses in the 1980s made the mistake of
A) holding too many liquid assets.
B) minimizing default risk.
C) failing to diversify their loan portfolio.
D) holding only safe securities.
2) A bank will want to hold more excess reserves (everything else equal) when
A) it expects to have deposit inflows in the near future.
B) brokerage commissions on selling bonds increase.
C) the cost of selling loans falls.
D) the discount rate decreases.
3) As the costs associated with deposit outflows ________, the banks willingness to hold excess reserves will ________.
A) decrease; increase
B) increase; decrease
C) increase; increase
D) decrease; not be affected