If the Fed Decreases the Required Reserve Ratio at a Time

question 55

Multiple Choice

If the Fed decreases the required reserve ratio at a time when banks are holding no excess reserves,the Fed is:

• A)forcing banks to increase the money supply.
• B)forcing banks to decrease the money supply.
• C)making it possible for banks to increase the money supply but not forcing them to do so.
• D)making it possible for banks to decrease the money supply but not forcing them to do so.
• E)conducting open market operations but not changing the money supply.

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Definitions:

Theory

A system of ideas intended to explain something, especially one based on general principles independent of the thing to be explained.

Nondirectional Research Hypothesis

A hypothesis that predicts a relationship or effect but does not specify the direction of the relationship.

Directional Research Hypothesis

A hypothesis that indicates the anticipated direction of the difference or relationship among variables.

Null Hypothesis

A type of hypothesis used in statistics that proposes that no statistical significance exists in a set of given observations.