Other Things Equal, When the Fed Raises the Reserve Requirement

question 63

True/False

Other things equal, when the Fed raises the reserve requirement, the banking system's excess reserves will fall, the deposit expansion multiplier will decline, and the money supply will decrease.

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Definitions:

Politicians

Individuals who are actively involved in politics, especially as an elected official in a governmental role.

Dissonance Reduction

The process of reducing psychological discomfort by rationalizing or changing one's attitudes or beliefs to be more consistent with one's actions.

Justification of Effort

The tendency to attribute a higher value to outcomes that require a greater amount of effort to achieve.

Hindsight Bias

The tendency to believe, after learning an outcome, that one would have foreseen it, also known as the "I-knew-it-all-along" effect.