By Affecting the Amount of Reserves in the Banking System

question 282

Multiple Choice

By affecting the amount of reserves in the banking system, the Fed can

• A) affect the size of the money supply.
• B) change the marginal tax rates.
• C) increase government purchases.
• D) reduce government purchases.

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Definitions:

Mortgage Loans

Loans secured by real property through the use of a mortgage note, typically used to purchase real estate.

Moderate Incomes

Earnings that are neither too high nor too low, often associated with the middle class in a given society.

Interest Rates

The cost of borrowing money or the return for investing, expressed as a percentage of the principal, influencing consumer and business spending.

Interest-sensitive Goods

Products or services whose demand is heavily influenced by changes in interest rates, such as housing and automobiles.