Which of the following actions by the Fed would tend to increase the money supply?
A. A bank has capital of $200 and a leverage ratio of 5. If the value of the bank’s assets declines by 10 percent, then its capital will be reduced to
a. $100.
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c. $180.
d. $185.
B. Which of the following actions by the Fed would tend to increase the money supply?
a. an open-market sale of government bonds
b. a decrease in reserve requirements
c. an increase in the interest rate paid on reserves
d. an increase in the discount rate on Fed lending
C. I f the Fed raises the interest rate it pays on reserves, it will _________ the money supply by increasing _________.
a. decrease; the money multiplier
b. decrease; excess reserves
c. increase; the money multiplier
d. increase; excess reserves
D. I n a system of fractional-reserve banking, even without any action by the central bank, the money supply declines if households choose to hold _________ currency or if banks choose to hold _________ excess reserves.
a. more; more
b. more; less
c. less; more
d. less; less
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