When the Fed Decreases Reserve Requirements, If the Ratio of Currency

question 27

Multiple Choice

When the Fed decreases reserve requirements, if the ratio of currency to deposits decreases also while the monetary base is constant, then:

• A)it cannot be determined whether the money supply increases or decreases.
• B)the money supply increases.
• C)the money supply decreases.
• D)the two changes exactly offset each other.

Understand the accounting equation and how specific transactions affect it.

Prepare and understand the balance sheet.

Calculate and analyze total assets and total liabilities in different scenarios.

Understand the layout and purpose of the three sections of the statement of cash flows and their interrelationships.

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Loans that are made across national borders, often involving different currencies and international financial institutions.

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