9. If the Federal Reserve were attempting to increase the money supply, which on
ID: 1124516 • Letter: 9
Question
9. If the Federal Reserve were attempting to increase the money supply, which one of the following would be most appropriate? lower the reserve ratio, lower the discount rate, conduct an open market operation purchase lower the reserve ratio, raise the discount rate, conduct an open market operation purcha raise the reserve ratio, raise the discount rate, conduct an open market operation sale raise the reserve ratio, lower the discount rate, conduct an open market operation sale a. b. c. d. A single commercial bank must meet a 25 percent reserve requirement. If the bank has no excess reserves initially and $5,000 of cash is deposited in the bank, it can increase its loans by a maximum of: a. $1,250. b. $120,000. c. $5,000. d $3,750. 10.Explanation / Answer
Answer
The increase in loan=deposits*(1-reserve ratio)
=5000*(1-0.25)
=3750
the bank can lend $3750
option d
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