3) Which of the following actions would increase the amount of reserves in the b

Question

3) Which of the following actions would increase the amount of reserves in the banking (2pts) system? the Fed buys U.S T-Bills the Fed buys Euros O O the Fed makes discount loans to banks O All of the above None of the above What would be the immediate effect of bank customers withdrawing large amounts of currency from banks? 4) both the money supply and bank reserves would decrease both the money supply and bank reserves would increase O bank reserves would remain unchanged and the money supply would increase the money suplly would remain unchanged and bank reserves would decline

Explanation / Answer

Ans A)

When the Fed buys US T Bills it increases the Money supply in economy that is ti follows expansionary policy; when it buys Euro it sells US Dollars which increases the supply again and increase the reserves

Made discount loans to the banks by Fed will again increase the reserves

Hence option D is correct response

Ans 4)

When Bank run happens that is Bank customers withdraw large amounts of currency from banks Money supply and Bank reserves will decrease becuase Bank will have to pay them from their reserves at first

Option A is correct response

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