1 The required reserve ratio refers to Capital stock to tota

1. The required reserve ratio refers to:

Capital stock to total assets.

The percentage of deposits that a bank must keep with the Federal Reserve

The percentage of deposits that banks must hold in government debt.

The percentage of excess reserves in the vault of a bank.

2. A restrictive monetary policy by the Fed should lead to:

A. An increase in the monetary base, an increase in the money supply, and a decrease in the Fed Funds Rate

B. A decrease in the monetary base, a decrease in the money supply, and an increase in the Fed Funds Rate

C. An increase in the monetary base, a decrease in the money supply, and an increase in the Fed Funds Rate

D. A decrease in the monetary base, a decrease in the money supply, and a decrease in the Fed Funds Rate

Solution

1) B

The percentage of deposits that a bank must keep with the Federal Reserve

2)A restrictive monetary policy will generally increase unemployment and decrease inflation so we can conclude that letter B is correct

B

decrease in the monetary base, a decrease in the money supply, and an increase in the Fed Funds Rate