Question

The corporate income tax is: a. a tax that businesses pay due to payroll expenses b....

The corporate income tax is:

a.

a tax that businesses pay due to payroll expenses

b.

a tax that businesses pay on its revenue

c.

a tax that households pay on their total wealth

d.

tax that businesses pay on its profits

Which of the following is not a type of monetary policy tool?

a.

Interest on excess reserves

b.

Quantitative Easing

c.

Federal Open Market Operations

d.

Interest on excess bond holding

  1. To prevent bank runs and increase confidence of the population on depository financial institutions, the Federal Reserve:

    a.

    Engaged in expansionary monetary policy

    b.

    Created deposit insurance through the FDIC

    c.

    Engaged in contractionary policy

    d.

    Incentivized the creation of more banks so they had a smaller chance to fail

The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough reserves to meet the higher requirements, then it is of the best interest of Southern Bank to:

a.

borrow from other similar banks for the short-term.

b.

buy bonds to increase the size of its reserve assets.

c.

reduce the quantity of money and loans on the balance sheet.

d.

borrow from the central bank.

Homework Answers

Answer #1

Ans:

1) Option D

tax that businesses pay on its profits

Explanation

corporate income tax is a tax imposed on the profits of the company.

2) Option B

Quantitative Easing

Explanation

The monetary policy tools used by federal reserve are the discount rate, reserve requirements, open market operations, and interest on reserves.

3) Option B

created deposit insurance through the FDIC

Explanation

The Federal Deposit Insurance Corporation is an independent agency that provides deposit insurance to depositors.

4) Option D

borrow from the central bank

Explanation

If the central bank has raised its reserve requirements, then it is of the best interest of Southern bank to borrow for the short term from the central bank.

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