Suppose that, for every 1 percentage point decline in the discount rate, commercial banks collectively borrow an additional $2 billion from Federal Reserve Banks. Also assume that the reserve requirement is 10%. If the Fed lowers the discount rate from 4.0% to 3.5%, bank reserves will ________.
A. increase by $1 billion and the money supply will increase by $10 billion
B. decline by $1 billion and the money supply will decline by $10 billion
C. increase by $1 billion and the money supply will increase by $5 billion
D. increase by $10 billion and the money supply will increase by $100 billion
Answer: A
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A fish hatchery raises brook trout and rainbow trout. An increase in the market price of brook trout therefore tends to
A) reduce the demand for brook trout. B) increase the hatchery's cost of raising rainbow trout. C) increase the demand for brook trout. D) decrease the hatchery's cost of raising rainbow trout.
If the CPI was 68 in 1965 and is 285 today, then $100 today purchases the same amount of goods and services as
a. $23.86 purchased in 1965. b. $32.47 purchased in 1965. c. $68.00 purchased in 1965. d. $419.12 purchased in 1965.
he condition where the opportunity cost of producing additional units of a good rises as society produces more of that good is known as ______.
a. increasing opportunity cost b. deceasing production possibilities c. efficient opportunity allocation d. increasingly scarce efficiency
The relationship between the price and the interest rate for a zero coupon bond is best described as:
A. fluctuating. B. volatile. C. inverse. D. non-existent.