Which of the Following Is True

question 141

Multiple Choice

Which of the following is true?

• A)If the Fed wants to increase the money supply, it should increase the interest rate it pays banks on their excess reserves.
• B)When the Fed reduces the interest rate paid on excess reserves, it increases the incentive of commercial banks to hold excess reserves.
• C)If the Fed wants to reduce the future growth rate of the money supply, it could do so by increasing the interest rate it pays banks on excess reserves.
• D)When the Fed increases the interest rate it pays on excess reserves, this encourages banks to extend more loans and thereby increase the money supply.

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