Question

If the reserve ratio and reserve requirement are both 12.5 percent, then the value of the money multiplier is more than 10

Select one:

True

False

Question 2

If the reserve requirement was increased banks would be prompted to increase their lending.

Select one:

True

False

The reserve requirement is the fraction of deposits that banks must hold in reserve and the reserve ratio is the fraction of deposits that the banks hold in reserve. As a consequence the reserve requirement is always equal to or more than the reserve ratio.

Select one:

True

False

Question 4

If the Fed lowers the reserve requirement or raises the discount rate or buys government bonds then the money supply will decrease.

Select one:

True

False

Question 5

The discount rate is the interest rate banks receive on reserve deposits with the Fed.

True or False

Answer 1

1 - False

The value of multiplier will be 8 , which is less than , 10

2 - false

Banks will have to lend less , as they will have to keep more funds than before in form of reserves

3 - True

The given explaination for the reserves and the reserves ratio is correct.

4 - False

The money supply will increase and not decrease as a result of the given tools.

5 - True

Discount rate is the rate that is decided by the Fed for lending loans to commercial banks.