An increase in ________ reduces the money supply since it causes the ________ to fall.

Question

BlackTom AI · Accepted Answer

The question asks about how an increase in a policy variable affects the money supply and through which mechanism this occurs.
Option 1: 'margin requirements; money multiplier' Margin requirements relate to consumer or asset purchases, not the banking system's reserve relationship. They do not determine the money multiplier in the standard money supply framework, so this pairing is not the mechanism by which the money supply falls. Therefore this option is incorrect.
Option 2: 'margin requirements; monetary base' Even if margin requirements change, the monetary base (currency in circulation plus reserves) is set by central bank actions, not by margin rules. Thus this option incorrectly links margin requirements to the monetary base and misidentifies the controlling channel for money supply changes.
Option 3: 'reserve requirements; monetary base' While increasing reserve requirements does tighten banks, it does not directly reduce the monetary base itself. The monetary base is influenced by central bank operations (e.g., open market operations) and currency in circulation, so tying reserve requirements to a fall in the monetary base is inaccurate. This makes the option incorrect.
Option 4: 'reserve requirements; money multiplier' Here, higher reserve requirements raise the reserve ratio, which lowers the money multiplier (the amount of money the banking system can create per unit of base money). Since the money supply equals the money multiplier times the monetary base, a fall in the multiplier leads to a reduction in the money supply. This option correctly identifies both the triggering policy variable and the mechanism.}

ECON 161A LEC A: MONEY... Homework 3 MCQ

An increase in reduces the money supply since it causes the to fall.

查看解析

登录即可查看完整答案

类似问题

Credit cards are considered part of M1 money supply because they can be used for transactions.

Suppose the Federal Reserve buys bonds from the banking system, the money supply curve

Jane has $200 in cash, $1,000 in savings deposits, and $5,000 invested in mutual funds. What most accurately describes her M1 holdings?

Suppose the Federal Reserve purchases 20 million dollars of Treasury Bills. The FED pays for this purchase by increasing the balance in the reserve accounts of those banks from whom it bought the securities. This operation will result in:

The relationship between bank reserves and the money supply is

If you withdraw $100 from your checking account and use the money to purchase a 14-month CD (certificate of deposit), M1 [ Select ] and M2 [ Select ]

According to the monetary theory we have learned in this class, all else the same, which of the following events will cause the supply of money to increase, in both the scarce reserves and ample reserves eras?

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单