When the Reserve Bank sells government securities, the banks'Group of answer choicesreserves will increase and lending will contract, causing no change in the money supply.reserves/deposit ratio will increase and lending will expand, causing an increase in the money supply.reserves will decrease and lending will contract, causing a decrease in the money supply.reserve requirements will increase and lending will contract, causing a decrease in the money supply.reserves will increase and lending will expand, causing an increase in the money supply.

If the Federal Reserve System buys government securities,Multiple Choicethe money supply will not change.interest rates on the securities will not change.interest rates on the securities will fall.the equilibrium price of the securities purchased will fall.

The actual change in the money supply as a result of an increase in excess reserves will be less than the maximum change if banksGroup of answer choicesdo not lend out all of their excess reservesborrow from the Federal Reservesell some of their government securities to the Federal Reservelend only their excess reserves

If banks are currently holding zero excess reserves and the Fed lowers the required reserves ratio, which of the following will happen?Group of answer choicesBanks will have a reserve deficiency.Banks will have positive excess reserves.Banks will extend fewer loans.Banks will call in some of their loans to meet the reserve deficiency.

Changes in money supply can affect:Question 4Answera.Interest rates and borrowing costsb.Unemployment rates and labor force participationc.Stock market prices and bond yieldsd.Government budget deficits

Banks can expand reserves, and make more loans by:Multiple select question.attracting deposits and encouraging saving.paying lower interest rates.borrowing from the Federal Reserve.lowering their reserves.