When the Fed raises the required reserve ratio, then the:
a. ability of banks to make loans is restricted.
b. ability of banks to make loans is enhanced.
c. ability of banks to make loans is unaffected.
d. interest rate that banks pay to the Fed to borrow money is increased.
e. interest rate that banks pay to other banks to borrow money is increased.
QUESTION 2When the Fed raises the required reserve ratio, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public.
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make loans to he general public.
d. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
QUESTION 3An increase in the required reserve ratio by the Federal Reserve would:
a. cause M1 to contract.
b. cause M1 to expand.
c. have no effect on M1 or M2.
d. affect only M2, not M1.
QUESTION 4Which of the following actions by the Fed would increase the money supply?
a. Reducing the required reserve ratio.
b. Selling bonds in the open market.
c. Increasing the discount rate.
d. None of these.
QUESTION 5When the Fed lowers the required reserve ratio, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public
b. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public.
c. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public.
d. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
e. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
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