Which of the following policy actions by the Fed would cause the money supply to decrease?
a. An open-market purchase.
b. A decrease in required reserve ratios.
c. A decrease in the discount rate.
d. None of these.
Question 2
Which of the following statements is true?
a. The simple money multiplier equals the reciprocal of the required reserve ratio.
b. Required reserves is the minimum balance that the Fed requires a bank to hold in vault cash or on deposit with the Fed.
c. The discount rate is the interest rate charged banks for loans from the Fed.
d. Excess reserves equal total reserves minus required reserves.
e. All of these.
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