6) Which of the following is a service of depository institutions?

A) pooling risk

B) monitoring the Federal Reserve

C) decreasing the liquidity drain of funds in the banking system

D) loaning funds to other depository institutions at the discount rate

7) Which of the following best describes the chain of events in the money creation process?

A) The monetary base increases. Banks acquire excess reserves which they loan out, increasing deposits and also the quantity of money. The new deposits then create additional excess reserves.

B) Low interest rates discourage people from holding currency. When they deposit the currency, interest rates rise, increasing the quantity of money.

C) Currency is drained from the quantity of money into the banking system, where it is lent out. The loans are spent, increasing the currency drain and also the quantity of money.

D) Desired reserves increase, encouraging banks to seek new deposits. When the new depositors come in, desired reserves decrease and the quantity of money increases