If the Fed's Credit Policies Induces Banks to Hold Substantial

question 329

Multiple Choice

If the Fed's credit policies induces banks to hold substantial excess reserves at the Fed, then

• A) financial markets will become more illiquid.
• B) the money multiplier will fall.
• C) the money supply will rise.
• D) the scope of asymmetric-information problem for banks will improve.

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Definitions:

Neurotransmitter

Chemical messengers that transmit signals across synapses from one neuron to another, facilitating communication within the nervous system.

Voluntary Muscles

Muscles that can be consciously controlled to perform movements, as opposed to involuntary muscles, such as those in the heart or digestive system.

Agonist

An agonist is a chemical or drug that binds to receptors in the brain and activates them, often mimicking the action of naturally occurring substances.

GABA

Gamma-Aminobutyric Acid, a chief inhibitory neurotransmitter in the mammalian central nervous system, playing a key role in reducing neuronal excitability.