The Fed changes the reserve requirement sparingly because:
A. sudden changes of such a huge magnitude would have far-reaching, and sometimes undesirable, effects.
B. it would cause uncertainty for banks and slow their rate of lending.
C. very small changes cause very large overall changes to money supply due to the money multiplier.
D. All of these are true.
Answer: D
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What will be an ideal response?
The above figure shows the apartment rental market in Bigtown. If the Bigtown Housing Authority imposes a rent ceiling of $1,000 per month, the ceiling will
A) help all renters. B) help some renters and hurt other renters. C) help all landlords. D) have no effect at all on the Bigtown rental market.