Which of the Following Statements Regarding the Money Supply Process

question 1

Multiple Choice

Which of the following statements regarding the money supply process is false?

• A)Open market sales increase the supply of reserves, whereas open market purchases decrease the supply of reserves.
• B)When the Fed makes a discount loan, reserves increase; when a discount loan is paid off, reserves decrease.
• C)Depository institutions loan out excess reserves and, in the process, create money.
• D)Any one institution can safely lend only its excess reserves.

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