In the model of the money supply process,the Federal Reserve's role in influencing the money supply is represented by

Question

Quizplus · Accepted Answer

The model of the money supply process involves the Federal Reserve's control over the supply of reserves in the banking system. The required reserve ratio is the percentage of deposits that banks must hold in reserve, which directly affects the amount of excess reserves that banks have available for lending. The Federal Reserve also controls the level of nonborrowed reserves, which are the reserves that banks hold without borrowing from the Fed, by influencing the market interest rate. If the Fed buys or sells government securities, it can affect the level of borrowed reserves that banks hold as well. Therefore, the correct answer is B as it includes all three types of reserves (required, nonborrowed, and borrowed) that the Fed can control to influence the money supply.

In the Model of the Money Supply Process,the Federal Reserve's