Question 47 When the Fed raises the legal reserve requirement, it Question 47 options: a) increases the bank’s excess reserves, thereby lowering the money supply b) decreases the banks’ excess reserves, thereby decreasing the money supply c) decreases the banks’ excess reserves, thereby increasing the money supply d) increases the banks’ excess reserves, thereby increasing the money supply

Answer) Reserve requirements is considered as an amount of cash that bank should retain with them.…

Answered: When the Fed raises the legal reserve…

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter15: Money Creation

Section: Chapter Questions

Problem 20SQ

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Question 47

When the Fed raises the legal reserve requirement, it

Question 47 options:

a)	increases the bank’s excess reserves, thereby lowering the money supply

b)	decreases the banks’ excess reserves, thereby decreasing the money supply

c)	decreases the banks’ excess reserves, thereby increasing the money supply

d)	increases the banks’ excess reserves, thereby increasing the money supply

Definition Definition Capital reserves held by banks or financial institutions over and above the reserves that are required to be maintained by the regulator toward its liabilities and for internal controls. For commercial banks, excess reserve is the amount over the standard reserve as decided by the central bank. These excess reserve funds are available in the form of cash and cash equivalents.

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