Question

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. Explain how each of the following policy actions by the Fed would affect AR,RR, ER,bank lending, and the growth of the money supply: 1. a decrease in the required reserve ratio AR (Select) ER (Select) money multiplier Select) 7 7 RR [Select ] bank lending [Select) money supply [Select] 2. an increase in the discount rate 7 AR [Select] ER (Select) money multiplier [Select] RR (Select] bank lending (Select] money supply [Select]

Answer 1

(1) When there is decline in the necessary stores proportion then Actual Reserves remaining same,Excess Reserves increases, Money multiplier increases, Required Reserves decreases, bank loaning increases, and money supply increases.

(2) when rebate rate increases then all things considered bank shorten their loaning from national bank.

At the point when national bank builds the rebate rate then Actual reserves decreases, Excess reserves decreases, money multiplier remains same, Required reserves remains same, bank lending decreases, and money supply decreases.

(3) At the point when Taken care of procurement United States government protections from the open then Actual reserves (AR) increases, Excess reserves (ER) increases, money multiplier remains same, Required reserves increases, bank lending increases, and money supply increases.