Ceteris paribus, the money supply becomes smaller when:
A. The Federal Reserve reduces the reserve requirement.
B. An individual deposits currency into her transactions account.
C. An individual repays the money that he borrowed from a bank.
D. A bank reduces its excess reserves to make a loan.
Ceteris paribus, the money supply becomes smaller when:
A. The Federal Reserve reduces the reserve requirement.
B. An individual deposits currency into her transactions account.
C. An individual repays the money that he borrowed from a bank.
D. A bank reduces its excess reserves to make a loan.
Related textbook solutions
Related questions
1) Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit,
a) Bank A's reserves immediately increased by $______.
b) Bank A's required reserves increased by $______.
c) Bank A's excess reserves increased by $______.
d) Bank A can make a maximum new loan of $______.
e) Checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of $______.
| Assets | Liabilities |
| Reserves +$4000 | Deposits +$4000 |
2) Refer to the table above. Suppose a transaction changes a bank's balance sheet as indicated in the T-account, and the required reserve ratio is 10 percent. As a result of the transaction, the bank has excess reserves of $______.
3) Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent. If the Federal Reserve reduces the required reserve ratio to 15 percent, then the bank will now have excess reserves of $______.
