Assume the Fed Creates Excess Reserves in the Banking System

question 93

Multiple Choice

Assume the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad. This situation is a problem of:

• A) "Putting all your eggs in one basket"
• B) "Not in my own back yard"
• C) "There ain't no such thing as a free lunch"
• D) "You can lead a horse to water, but you can't make it drink"

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