Exhibit 16-2
-Each of the following can cause the supply of money to shift from S to S* in Exhibit 16-2, except
A)an increase in the required reserve ratio
B)the sale of US Treasury securities by the Fed
C)a decrease in the required reserve ratio
D)a decrease in the discount rate
E)an increase in excess reserves in the banking system

Question

Exhibit 16-2 
-Each of the following can cause the supply of money to shift from S to S* in Exhibit 16-2, except
A)an increase in the required reserve ratio 
B)the sale of US Treasury securities by the Fed 
C)a decrease in the required reserve ratio 
D)a decrease in the discount rate 
E)an increase in excess reserves in the banking system

Quizplus · Accepted Answer

The sale of US Treasury securities by the Fed would cause a shift from S* to S, reducing the supply of money. The other options would cause a shift from S to S*, increasing the supply of money.

Exhibit 16-2 -Each of the Following Can Cause the Supply of Money