Quizzol

QUESTION:

The Federal Reserves establishes the interest rate charged on funds it loans to banks and other financial institutions. A lower interest rate the incentive to borrow funds from the Federal Reserve, thereby the quantity of reserves in the banking system, which causes the money supply to .

When the Federal Reserve loans less funds to banks and another financial institutions, the quantity of reserves in the banking system and the money supply .

ANSWER:

The Federal Reserves establishes the interest rate charged on funds it loans to banks and other financial institutions. A lower interest rateincreases Correct

the incentive to borrow funds from the Federal Reserve, therebyincreasing Correct

the quantity of reserves in the banking system, which causes the money supply torise Correct

Points:

1 / 1

An increase in the interest rate the Fed charges borrowers makes borrowing from the Federal Reserve more expensive. When banks or other financial institutions borrow less funds from the Fed, bank reserves decline and the money supply contracts.

In contrast, a decrease in the interest rate the Fed charges borrowers makes borrowing from the Federal Reserve less expensive. When banks or other financial institutions borrow more funds from the Fed, bank reserves increase and the money supply expands.

When the Federal Reserve loans less funds to banks and another financial institutions, the quantity of reserves in the banking systemdecreases Correct

and the money supplydecreases Correct

Points:

1 / 1

Extension of additional loans by the Fed injects additional reserves into the banking system, causing the money supply to expand. On the other hand, when the quantity of loans extended by the Fed decline, bank reserves decrease, and the money supply contracts.

Posted by Cleveland on September 9, 2024