Which of the Following Statements BEST Describes Why a Decrease

question 109

Multiple Choice

Which of the following statements BEST describes why a decrease in reserve requirements often results in an increase in the money supply?

• A) A decrease in reserve requirements gives banks more money to better determine their interest rates.
• B) A decrease in reserve requirements gives banks more money to pay off their debts.
• C) A decrease in reserve requirements gives banks more money to lend out.
• D) A decrease in reserve requirements gives banks more money to offset lower interest rates.
• E) A decrease in reserve requirements gives banks more money to reward their employees for meritorious financial ventures.

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Definitions:

P-value

The probability of obtaining a test statistic at least as extreme as the one observed, assuming the null hypothesis is true; used to determine statistical significance.

Hypothesis

A supposition or proposed explanation made on the basis of limited evidence as a starting point for further investigation.

Confidence Interval

A span of values, generated from the statistics of a sample, that is likely to comprise the value of an undefined population parameter.

Test Statistic

A value calculated from sample data during a hypothesis test that is used to determine whether to reject the null hypothesis.