The main technique used by the Fed to alter the excess reserves of commercial banks in order to control the growth of the money stock is
What will be an ideal response?
purchases or sales of government bonds.
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Using the money demand and money supply model, an increase in money demand would cause the equilibrium interest rate to
A) increase. B) decrease. C) not change. D) increase, then decrease.
One of the primary sources of diseconomies of scale is the inefficiencies associated with managing large scale operations
Indicate whether the statement is true or false
Jessica makes photo frames. She spends $5 on the materials for each photo frame. She can create one photo frame in an hour. She earns $10 per hour at a part-time job at the local coffee shop. She can sell a photo frame for $30 each. An economist would calculate the total profit for one photo frame to be
a. $10. b. $15. c. $20. d. $25.
When economists say that banks must hold a percentage of their total deposits in reserve form, what does this mean?
A) It means that banks must hold a fraction of their customers' deposits either as bank deposits at the Federal Reserve, or as vault cash, or both. B) It means that banks reserve the right to turn away customers a certain percentage of the time. C) It means that the fraction of vault cash a bank has cannot be greater than the fraction of bank deposits (it has) at the Federal Reserve. D) Essentially, it means that total reserves are greater than required reserves. E) none of the above