If the Federal Reserve Lowered the Reserve Requirements Imposed on the Banking

question 89

Multiple Choice

If the Federal Reserve lowered the reserve requirements imposed on the banking industry, which of the following will most likely happen in the short run?

• A) an increase in the demand for loanable funds, which will exert upward pressure on the interest rate
• B) an increase in the supply of loanable funds, which will exert downward pressure on the interest rate
• C) an increase in the unemployment rate
• D) a decrease in the rate of inflation