14. Although the Fed has very strong influence over the money supply, it does no
ID: 1214349 • Letter: 1
Question
14.Although the Fed has very strong influence over the money supply, it does not have complete control
a.
Because the Fed has no idea how much reserves will change when it buys or sells securities.
b.
Because of unpredictable changes in the public's desire to hold cash or borrow and banks' desires to hold reserves or lend.
c.
Because of unpredictable changes in reserve requirements.
d.
Because the FOMC meets only twice a year.
a.
Because the Fed has no idea how much reserves will change when it buys or sells securities.
b.
Because of unpredictable changes in the public's desire to hold cash or borrow and banks' desires to hold reserves or lend.
c.
Because of unpredictable changes in reserve requirements.
d.
Because the FOMC meets only twice a year.
Explanation / Answer
b. Because of unpredictable changes in the public's desire to hold cash or borrow and banks' desires to hold reserves or lend.
People's desire to hold cash depends on transaction, precaution and speculation motives.
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