If the quantity of bank reserves held at the Fed increases,________.
A) banks make more loans
B) bank deposits decrease
C) the real interest rate increases
D) the M2 measure of money decreases

Question

Quizplus · Accepted Answer

When the quantity of bank reserves held at the Fed increases, banks are able to make more loans due to increased liquidity. This leads to an increase in the money supply and ultimately economic activity.

If the Quantity of Bank Reserves Held at the Fed