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Quiz 2: Economics: The Framework for Business
If Spending Is Lower Than Revenue, the Government Incurs a Budget
Question 3
True False
If spending is lower than revenue, the government incurs a budget deficit and must borrow money to cover the shortfall.
False
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Q 4
The discount rate is the interest rate the Fed charges on its loans to commercial banks.
Q 5
When the Fed reduces the discount rate, banks can obtain funds at a lower cost and use these funds to make more loans to their own customers.
Q 6
The Fed requires that all of its member banks hold funds called "reserves," equal to a stated percentage of the deposits held by their customers. This percentage is called the reserve requirement.
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