Suppose the central bank had increased the monetary base to expand money supply by x%. However, the central bank found that the money supply increased at a much lower rate than x%. Which of the following can possibly explain this result? (i) Households chose to put more money in banks and to reduce their holdings of currency. (ii) Banks increased the loans that they made available to borrowers. (iii) Banks increased their holdings of reserves above the reserve requirement. (iv) Banks increased their capital. a. Only (i) and (ii) are correct. b. Only (iii) and (iv) are correct. O C. Only (iii) is correct. O d. Only (iv) is correct.

Suppose the central bank had increased the monetary base to expand money supply by x%. However, the central bank found that the money supply increased at a much lower rate than x%. Which of the following can possibly explain this result? (i) Households chose to put more money in banks and to reduce their holdings of currency. (ii) Banks increased the loans that they made available to borrowers. (iii) Banks increased their holdings of reserves above the reserve requirement. (iv) Banks increased their capital. a. Only (i) and (ii) are correct. b. Only (iii) and (iv) are correct. O C. Only (iii) is correct. O d. Only (iv) is correct.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Money Growth And Inflation

Section: Chapter Questions

Problem 1CQQ

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