Suppose Banks Decide to Hold More Excess Reserves Relative to Deposits.Other

question 16

Multiple Choice

Suppose banks decide to hold more excess reserves relative to deposits.Other things the same,this action will cause the

• A)money supply to fall.To reduce the impact of this the Fed could sell Treasury bonds.
• B)money supply to fall.To reduce the impact of this the Fed could buy Treasury bonds.
• C)money supply to rise.To reduce the impact of this the Fed could sell Treasury bonds.
• D)money supply to rise.To reduce the impact of this the Fed could buy Treasury bonds.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus in a market, reflecting the total net benefit to society from the production and consumption of goods and services.

Trade

The exchange of goods and services between parties, which can be within or across national borders.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually do pay.

Trade

The process of purchasing, vending, or trading products and services among individuals, corporations, or nations.