Bank reserves can be viewed as: a. Profitable assets in a bank's ...

[chads108]

Bank reserves can be viewed as:
 a. Profitable assets in a bank's portfolio.
  b. Taxes on profits.
  c. Assets that all banks should have in excess, if they want relatively high profits and relatively low risks.
  d. All the above.

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 net nonreserve-related international borrowing/lending in the context of the Three-Sector-Model?
 a. The real risk-free interest rate rises, and net nonreserve-related international borrowing/lending becomes more positive (or less negative).
  b. There is not enough information to determine what happens to these two macroeconomic variables.
  c. The real risk-free interest rate and net nonreserve-related international borrowing/lending remain the same.
  d. The real risk-free interest rate rises, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).
  e. The real risk-free interest rate falls, and net nonreserve-related international borrowing/lending becomes more negative (or less positive).

[mjenn52]

Answer to Question 1

.B

Answer to Question 2

.D

[chads108]

Gracias!

[Joy Chen]

Thanks for the timely response, appreciate it