When the Fed Decreases the Interest Rate Paid on Reserves

question 100

Multiple Choice

When the Fed decreases the interest rate paid on reserves, if the ratio of currency to deposits decreases also while the monetary base is constant, then:

• A) it cannot be determined whether the money supply increases or decreases.
• B) the money supply increases.
• C) the money supply decreases.
• D) the two changes exactly offset each other.

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Definitions:

Systems Charge

A fee or cost associated with the use or maintenance of a system, which can vary depending on the type and purpose of the system.

Separated

The state of being divided or kept apart from something or someone else.

Picked Up

A phrase indicating that something has been lifted off a surface or that interest, intensity, or pace has increased.

Contaminant Transport

The movement of chemical substances or pollutants through the environment, affecting air, water, and soil quality.