If the Fed Increases the Required Reserve Ratio at a Time

question 40

Multiple Choice

If the Fed increases the required reserve ratio at a time when banks are holding excess reserves, then _____

• A) the Fed's aim is to increase the money supply.
• B) banks are likely to lend out more money than they would if the Fed left the reserve ratio alone.
• C) banks are likely to earn higher profits than they would if the Fed left the reserve ratio alone.
• D) the money supply will not increase as much as it would if the Fed left the reserve ratio alone.
• E) the Fed's aim is to conduct open market operations without changing the money supply.

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