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    Question

    By lowering the central bank’s margin requirements,

    borrowers’ borrowing capacity increases:
    A Falls Correct Answer Incorrect Answer
    B No effect Correct Answer Incorrect Answer
    C Rises Correct Answer Incorrect Answer
    D Equal Correct Answer Incorrect Answer
    E May rise or may fall Correct Answer Incorrect Answer

    Solution

    Lending Rates are the difference between the Collateral security’s face value and the loan amount specified. The smaller the margin restrictions, the larger the sanctioned loan amount.

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