Respuesta :
The thing that can be done if the fed wants to expand the money supply as part of its anti-recession strategy is to lower the interest rate paid on excess reserves to encourage banks to make more loans (B).
Definition of Money Supply
The money supply is the entire supply of money in an economy. The money supply can include cash, coins, and balances in checking and savings accounts.
We need to monitor changes in the money supply because these changes affect security price levels, inflation, exchange rates, and the business cycle.
There is strong empirical evidence of a direct relationship between growth in the money supply and inflation, at least for a quick increase in the amount of money in the economy. When a country experiences a very rapid increase in their money supply, they also experience a very rapid increase in their prices (hyperinflation).
Complete Question:
a. increase the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.
b. decrease the interest rate paid on excess reserves encouraging banks to extend more loans.
c. increase the interest rate paid on excess reserves encouraging banks to extend more loans.
d. decrease the interest rate paid on excess reserves encouraging banks to hold excess reserves rather than extend more loans.
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