Bank reserves include: a. High quality (i.e., AAA-rated) loans. ...

[HudsonKB16]

Bank reserves include:
 a. High quality (i.e., AAA-rated) loans.
  b. Vault cash and deposits at the central bank.
  c. Tellers, who are trained and ready to work in case of a general bank strike.
  d. Government bonds, high-quality (e.g., AAA) corporate stocks, and cash in circulation.
  e. Checking deposits and borrowings from the central bank.

Question 2

Assume that the central bank increases the reserve requirement. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
 a. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more positive (or less negative).
  b. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more negative (or less positive).
  c. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same.
  d. The real risk-free interest rate and reserve-related (central bank) transactions remain the same.
  e. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).

[jlaineee]

Answer to Question 1

.B

Answer to Question 2

.C