Home » 14) Which of the following is most likely to increase the quantity of reserves demanded by the commercial banking system?

14) Which of the following is most likely to increase the quantity of reserves demanded by the commercial banking system?

14) Which of the following is most likely to increase the quantity of reserves demanded by the commercial banking system?

A) An increase in reserve requirements.

B) A reduction in the interest rate paid on reserves.

C) An open market sale by the central bank.

D) An increase in the rate of interest on short-term Treasury securities.

15) If households convert some of their bank deposits into currency, then, other things equal,

A) commercial banks’ reserves decline and the monetary base is unchanged.

B) commercial banks’ reserves decline and the monetary base declines.

C) commercial banks’ reserves rise and the monetary base rises.

D) commercial banks’ reserves are unchanged and the monetary base is unchanged.

16) In modern economies like those of the U.S. and Australia, the best reason for believing that the central bank can influence the M1 money stock is that:

A) the vast bulk of M1 is currency.

B) all the items in M1 are liabilities of the government.

C) changes in reserve requirements on bank deposits play a very important part in modern monetary policy conduct.

D) the commercial banking system’s rate of creation of bank deposits is responsive to actions taken by the central bank in the market for reserves.

17) The ability of a central bank to set monetary policy instruments is

A) national independence.

B) goal independence.

C) discretionary independence.

D) instrument independence.

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