If the Board of Governors of the Federal Reserve System

question 196

Multiple Choice

If the Board of Governors of the Federal Reserve System increases the legal reserve ratio, this change will

• A) increase the excess reserves of member banks and thus increase the money supply.
• B) increase the excess reserves of member banks and thus decrease the money supply.
• C) decrease the excess reserves of member banks and thus decrease the money supply.
• D) decrease the excess reserves of member banks and thus increase the money supply.

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Definitions:

Interest Rate

The percentage of a sum of money charged for its use, often expressed as an annual percentage rate.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenue.

Revenue

The income that a business receives from its normal business activities, usually from the sale of goods and services to customers.

Costs Of Production

The total expenses incurred in manufacturing a product or delivering a service.