How would the Fed's reduction of the reserve ratio requirement affect the money supply?
What will be an ideal response?
Since banks would rather loan out deposits than hold them as reserves, banks would respond to this policy change by loaning more, thereby increasing the money supply.
You might also like to view...
The three principal factors that explain why the aggregate demand curve is downward sloping are
a. real wealth holdings, the interest rate, and international trade b. the price level, the interest rate, and economic growth c. the interest rate, the economic growth, and international trade d. cost-pull inflation, demand-pull inflation, and real wealth holdings e. the phases of the business cycle: recession, downturn, and recovery
Along a supply curve,
a. supply changes as price changes. b. quantity supplied changes as price changes. c. supply changes as technology changes. d. quantity supplied changes as technology changes.
Jose's restaurant operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $20, AVC = $15, and the price per unit is $10 . In this situation,
a. Jose's restaurant is earning a positive economic profit. b. Jose's restaurant should shut down immediately. c. Jose's restaurant is losing money in the short run but should continue to operate. d. the market price will rise in the short run to increase profits.
Which of the following policies should be used to close an inflationary GDP gap?
A. Increases in government spending and increases in transfer payments B. Tax increases C. Increases in government spending D. Increases in transfer payments