If the Fed Lends to Member Banks, What Happens to Reserves

question 166

Multiple Choice

If the Fed lends to member banks, what happens to reserves and the money supply?

• A) Reserves increase and the money supply decreases.
• B) Both increase.
• C) Reserves decrease and the money supply increases.
• D) Both decrease.

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Definitions:

Unemployment

A situation where an individual who is capable of working and is actively seeking work is unable to find employment.

Income

The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as a profit from financial investments.

Wages

Payment usually received by an employee on a regular basis for services rendered to an employer, often quantified as an hourly, daily, or piecework amount.

Salaries

Regular payments made to employees for their labor, typically based on a fixed annual amount and paid in monthly or biweekly installments.