III. 1. If excess reserves are zero and the BSP increases the required reserve ratio from 5 percent to 10 percent, then the money multiplier (increases, decreases) _________ from __ to ___ and money supply (increases, decreases) __________ 2. If the required reserve ratio is 8 percent, commercial banks do not hold excess reserves, and people do not hold currency, then when the Central Bank purchases $20 million of government bonds, bank reserves of commercial banks (increase, decrease________ by _________ and the money supply eventually (increases, decreases) ________ by ______. 3. If the reserve ratio is 15 percent, and commercial banks do not hold excess reserves, and people hold only demand deposits and no currency, then when the Central Bank sells $65 million worth of bonds to the public, commercial bank reserves (increase, decrease) _____ by _______ and the money supply eventually (increases, decreases) _______by _______. 4. A decrease in the discount rate will (increase, decrease) _______ commercial bank borrowings from the central bank, (increase, decrease) _______ commercial bank reserves, and (increase, decrease) _______ the money supply. 5. When the BSP pays interest on commercial bank reserves, this will (increase, decrease) ________ the excess reserves of commercial banks, (increase, decrease) _______ the reserve ratio of commercial banks, and (increase, decrease) ________ money supply. 6. When the Central Bank buys bonds, bank reserves of the commercial banks (increase, decrease) _____________ so that the overnight lending rate or the policy rate (increases, decreases) ___________. 7. When the Central Bank sells bonds, bank reserves of the commercial banks (increase, decrease) _____________ so that the overnight lending rate or the policy rate (increases, decreases) ________
III. 1. If
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