36. If the Fed reduces the required reserve ratio, a. excess reserves will incre
ID: 1109172 • Letter: 3
Question
36. If the Fed reduces the required reserve ratio, a. excess reserves will increase. b. excess reserves will decrease. c. total reserves will increase. d. total reserves will decrease. 37. In 2008, the Fed utilized expansionary monetary policy which was made a. more effective as banks held more excess reserves. b. less effective as banks held more excess reserves. c. more effective as banks held less excess reserves d. less effective as banks held less excess reserves. 38. Price levels rarely remain the same. This implies that a. money is an excellent medium of exchange. b. money is divisible. c. money is a good medium for measuring value. d. money is an imperfect medium for storing value.Explanation / Answer
ANSWER -36 -A
when the fed reduces the required reserve ratio will leave the banks with an excess reserve which can induce an expansion of bank credit and deposit and may cause a decline in the interest rate.
changing the reserve requirement only changes the excess reserve and not the total reserve.
answer -37 - D -
in 2008 the fed utilized expansionary monetary policy which was made less effective as banks held less excess reserves.
Answer -38- D
price level rarely remains the same this implies that money is an imperfect medium for storing value because inflation slowly erodes the purchasing power of money over time.
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