A commercial bank can add to its actual reserves by: a. Lending money to bankcus

Question

A commercial bank can add to its actual reserves by:



a. Lending money to bankcustomers.

b. Buying governmentsecurities from the public.

c. Buying governmentsecurities from a Federal Reserve Bank.

d. Borrowing from a FederalReserve Bank.


If the Fed wants to increase the legal reserve ratio, we wouldexpect:



a. Lower interest rates, an expandedGDP, and depreciation of the dollar.

b. Lower interest rates, anexpanded GDP, and appreciation of the dollar.

c. Higher interest rates, acontracted GDP, and appreciation of the dollar.

d. Higher interest rates, acontracted GDP, and depreciation of the dollar.

If the Fed wants to increase the legal reserve ratio, we wouldexpect:



a. Lower interest rates, an expandedGDP, and depreciation of the dollar.

b. Lower interest rates, anexpanded GDP, and appreciation of the dollar.

c. Higher interest rates, acontracted GDP, and appreciation of the dollar.

d. Higher interest rates, acontracted GDP, and depreciation of the dollar.

Explanation / Answer

If the Fed wants to increase the legal reserve ratio, we wouldexpect:



a. Lower interest rates, an expandedGDP, and depreciation of the dollar.

b. Lower interest rates, anexpanded GDP, and appreciation of the dollar.

c. Higher interest rates, a contracted GDP, and appreciation of thedollar. - increase the amount of money stored in the Fed, so lessmoney supply

d. Higher interest rates, acontracted GDP, and depreciation of the dollar

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