When the Fed raises the required reserve ratio, then the: a.ability of banks to make loans is restricted. b.ability of banks to make loans is enhanced. c.ability of banks to make loans is unaffected. d.interest rate that banks pay to the Fed to borrow money is increased. e.interest rate that banks pay to other banks to borrow money is increased.

Answered: When the Fed raises the required…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

See similar textbooks

Related questions

Question

When the Fed raises the required reserve ratio, then the:

	a.	ability of banks to make loans is restricted.
	b.	ability of banks to make loans is enhanced.
	c.	ability of banks to make loans is unaffected.
	d.	interest rate that banks pay to the Fed to borrow money is increased.
	e.	interest rate that banks pay to other banks to borrow money is increased.

Expert Solution

Step 1

They are required to keep a higher proportion of all deposits made. In the event that banks choose to advance out the whole overabundance holds the cash supply can increment by as much as 20 x (1/0.08)=$250. On the other hand, an increment in required hold proportion raises the save proportion, brings down the cash multiplier, and diminishes the cash supply.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.

Similar questions