Reserve requirements are certainly observable by everyone. The Fed could announce these publicly so everyone would know what they are. The problems come in with the features of controllability and the ability to change these quickly. They would have to be announced with enough time for banks to adjust; also, as we saw with the money multiplier, the Fed cannot control the amount of excess reserves the banks hold. If banks really believed the Fed would change the reserve requirements often they may hold considerable excess reserves and then the link between the instrument and the ultimate objective would be seriously weakened.
Indicate whether the statement is true or false.
a. True
b. False
Answer: A. True.
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The economic value which can be created by a transaction between two people, Ed (seller) and Luis (buyer), is $50 as Ed's opportunity cost of selling is $135 and Luis' valuation of the good is $185 . If each gains $25 from this transaction, which of the following conclusions can be drawn?
a. Transaction costs are zero. b. Luis has higher bargaining power than Ed. c. Ed has higher bargaining power than Luis. d. Transaction costs are positive.
Trade can only benefit a nation if that nation has an absolute advantage in the production of that good
a. True b. False Indicate whether the statement is true or false
If the demand for online banking decreases, we would expect to see the
A. supply of workers that produce online-banking services to decrease. B. demand for workers that produce online-banking services to increase. C. supply of workers that produce online-banking services to increase. D. demand for workers that produce online-banking services to decrease.
Economic theory and history indicate that open elections and democratically elected governments
a. are unique in their ability to produce good economic institutions. b. must be accompanied by economic institutions that will allocate resources efficiently, or otherwise democratic institutions will not survive. c. reflect only transactions that are based on mutual agreement and voluntary exchange. d. are unable to guarantee either the emergence or continuation of economic institutions and policies that will encourage productive behavior.