Which of the Following Would Likely Increase the Money Supply

question 9

Multiple Choice

Which of the following would likely increase the money supply?

• A)One bank buys government securities from another bank.
• B)The required reserve ratio increases.
• C)The Fed increases the reserves of commercial banks and the banks hold these as excess reserves.
• D)The discount rate increases.
• E)A bank sells government securities to the Fed.

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Definitions:

Trade Deficit

A situation occurring when a country's imports exceed its exports, resulting in a negative balance of trade.

Money Supply

Currency, checking deposits, and checklike deposits (M or M1).

Exchange Rate

The value of one currency for the purpose of conversion to another currency, determining how much one currency is worth in terms of another.

Pesos Per Dollar

A currency exchange rate that shows how many Mexican pesos can be exchanged for one US dollar.