If the Fed Reduces the Interest Paid on Banks' Reserves

question 246

Multiple Choice

If the Fed reduces the interest paid on banks' reserves, it is trying to make banks hold

• A) more excess reserves.
• B) less excess reserves.
• C) more required reserves.
• D) less required reserves.

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Definitions:

Supply Increase

A situation where the quantity of a good or service that is available to consumers rises.

Increasing-Cost Industry

An increasing-cost industry is one in which costs of production increase as the industry expands, often due to factors like limited resources or higher input prices.

Long-Run Supply Curve

A graphical representation showing quantities of goods a firm is willing and able to supply at different prices over a long period, assuming all inputs are variable.

Decreasing-Cost Industry

Industry whose long-run supply curve is downward sloping.