If commercial banks are maintaining a 5 percent reserve/deposit ratio and the Fed lowers the required reserve ratio to 3 percent, then banks may ________ their loans and deposits, and the money supply may ________.
A. decrease; increase
B. decrease; decrease
C. increase; increase
D. increase; decrease
Answer: C
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Refer to Scenario 10.2. Suppose that in addition to the tax, a business license is required to stay in business. The license costs $1000. What happens to profit?
A) It increases by $1000. B) It decreases by $1000. C) It decreases by less than $1000. D) It stays the same.
When the rate of cyclical unemployment is zero, the
a. natural rate of unemployment must also be zero. b. rate of frictional unemployment must be negative. c. economy must have entered a recessionary stage. d. economy is considered to be at full employment.
A nation can determine how close it is to the classical range by considering its:
a. Export position. b. Net export position. c. Exchange rate. d. None of the above.
If the Fed buys more bonds from the public, then the money supply will:
A. Decrease and the aggregate demand curve will shift to the right. B. Increase and the aggregate demand curve will shift to the right. C. Increase and the aggregate demand curve will shift to the left. D. Decrease and the aggregate demand curve will shift to the left.