Author Question: When the Fed lowers the required reserve ratio, it: a. lowers the cost of borrowing from the Fed, ... (Read 49 times)

savannahhooper · **on:** Jun 30, 2018

When 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.

Question 2

A decrease in the required reserve ratio will:
a. reduce commercial bank loans and reduce the money supply.
b. increase commercial bank loans and reduce the money supply.
c. increase commercial bank loans and increase the money supply.
d. decrease commercial bank loans and increase the money supply.