The Effect of an Increase of Required Reserves by the Fed

question 116

Multiple Choice

The effect of an increase of required reserves by the Fed is:

• A)a decrease in loanable funds of depository institutions
• B)a decrease in interest rates
• C)usually an increase in vault cashan increase of excess reserves
• D)to stimulate activity in the home construction field

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Definitions:

Production

The process that transforms scarce resources into useful goods and services.

Inputs

Resources used in the production process, including labor, capital, and materials.

Outputs

Goods and services of value to households.

Explicit Costs

Payments made directly to external parties as part of business operations, including salaries, rental fees, and the cost of goods.