If reserves held at the Fed by the private banks decrease, ...

[nramada]

If reserves held at the Fed by the private banks decrease, ________.
 
  A) the nominal interest rate will decrease B) banks will make more loans
  C) demand for labor will increase D) bank deposits will decrease

Question 2

Everything else remaining unchanged, what is likely to happen to the credit supply curve of households if:
  a. there is a decrease in the real interest rate?
  b. households expect a recession in near future?
 
  What will be an ideal response?

[ynlevi]

Answer to Question 1

D

Answer to Question 2

a. Everything else remaining unchanged, if there is a decrease in the real interest rate, there will be a downward movement along the credit supply curve of households.
b. Everything else remaining unchanged, if households expect a recession in near future, they will tend to save more today. This will cause the credit supply curve of households to shift to the right.