Answered: 9 To increase the money supply, the Fed…

9 To increase the money supply, the Fed could: a) increase the reserve requirement ratio b) sell bonds c) decrease the discount rate d) decrease income tax rates

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Required Reserve and Excess Reserve Analysis

A required reserve is an amount of cash that banks must keep with themselves, which is certain percentage of the deposits made by their customers. Required reserve is a percentage of the bank's deposits that the respective bank must have on each overnight. The percentage rate is set and determined by the nation’s central bank. It is important to have such funds accumulated to meet its uncertain obligations, sudden liabilities and withdrawals. Required reserve is also known as reserve ratio. Reserve ratio is an important tool to control the money supply.

Question

9th

8
Which of the following would increase the size of an economy's deposit multiplier?
a) If banks decide to hold less excess reserves
b) If people hold a greater amount of currency rather than deposit money in the bank
c) If the Federal Reserve increases the reserve requirement ratio
d) If the Federal Reserve decides to buy bonds
9
To increase the money supply, the Fed could:
a) increase the reserve requirement ratio
b) sell bonds
c) decrease the discount rate
d) decrease income tax rates
10
Which of the following two things would decrease the money supply?
a) The Fed sells bonds or increases the reserve requirement ratio
b) The Fed buys bonds or decreases the reserve requirement ratio
c) The Fed buys bonds or increases the reserve requirement ratio
d) The Fed sells bonds or decreases the reserve requirement ratio

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