If the Fed Wishes to Raise the Interest Rate,it Will

question 60

Multiple Choice

If the Fed wishes to raise the interest rate,it will

• A) increase the money supply
• B) decrease the money supply
• C) increase money demand
• D) decrease money demand
• E) simply set a higher market interest rate

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Definitions:

Reserve Requirements

Reserve requirements are regulations set by central banks determining the minimum amount of reserves that banks must hold against deposits.

Vault Cash

Physical money that is held in banks' vaults, often used to meet day-to-day withdrawal demands and regulatory reserve requirements.

Banking Act

Legislation that regulates the operation of banks, establishes banking practices, and ensures the stability and integrity of the banking system.

Reserve Requirements

Central bank regulations that set the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves rather than lend or invest.