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QUESTION 4 Fill in all the blanks. No partial credit. When a bank does not have enough reserve to meet the requirement of the
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When a bank does not have enough to meet the requirement of the Fed, it may choose to borrow money from the fed to cover the shortage ,paying the fed funds rate. Alternatively the bank can choose to borrow money from other banks' excess to cover the shortage,paying the federal interest rate.In practice banks use the second option more often than the first because if the bank borrow more frequently from the Fed, the Fed might interfere in banks lending practices.it is better to borrow from other banks for such temporary requirements.

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