If the Fed reduces the required reserve ratio, how will this affect excess reserves and the money supply?
a. Both will increase.
b. Excess reserves increase and the money supply decreases.
c. Both will decrease.
d. Excess reserves decrease and the money supply increases.
a
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A subsidy to wheat farmers reduces the price of a bushel of wheat from $2.50 to $2 per bushel. The equilibrium quantity of wheat sold prior to the subsidy was equal to 200,000 bushels. Predict the new equilibrium quantity of wheat after the imposition of the subsidy given that the demand for wheat is known to be unit elastic
a. 100,000 bushels b. 200,000 bushels c. 250,000 bushels d. 400,000 bushels
Which of the following events could explain an increase in interest rates together with an increase in investment?
a. The government runs a larger deficit. b. The government institutes an investment tax credit. c. The government replaces the income tax with a consumption tax. d. None of the above is correct.