8. One way to think about the Fed's ability to change the nation's M1 money supply is by thinking about its effects on t
Posted: Fri Jul 01, 2022 8:14 am
8. One way to think about the Fed's ability to change the nation's M1 money supply is by
thinking about its effects on the excess reserves within the banking system as a whole. In
short, anything that increases excess reserves will tend to increase the money supply;
anything that decreases excess reserves will tend to decrease the money supply. With that
in mind, what would tend to happen to excess reserves in the banking system, and the MI
money supply, if the Fed
a) lowers the required reserve ratio.
b) raises the required reserve ratio.
c)
buys U.S. securities on a mass scale.
d) sells U.S. securities on a mass scale
Make sure to briefly explain why
thinking about its effects on the excess reserves within the banking system as a whole. In
short, anything that increases excess reserves will tend to increase the money supply;
anything that decreases excess reserves will tend to decrease the money supply. With that
in mind, what would tend to happen to excess reserves in the banking system, and the MI
money supply, if the Fed
a) lowers the required reserve ratio.
b) raises the required reserve ratio.
c)
buys U.S. securities on a mass scale.
d) sells U.S. securities on a mass scale
Make sure to briefly explain why