Question

1.) From the bank's perspective, is the following cash outflow predictable or not predictable: A manufacturer...

1.) From the bank's perspective, is the following cash outflow predictable or not predictable:

A manufacturer draws down its line of credit in order to purchase inventory.

A.) Predictable

B.) Not Predictable

2.)Under a lagged reserve accounting system, banks hold reserves against deposit balances from one day earlier

A.) True

B.) False

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Answer #1

1. Not predictable

Working capital loan of many companies cannot be predicted. Sales may change according to the needs of retailers.

2. False

Under a lagged reserve accounting system, bank's currency reserves are held with the Federal Reserve to be tied to value of its demand deposit accounts 14 days earlier.

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