An increase in depository institutions' reserves will cause
A) the Fed Funds rate to rise.
B) planned inventory investment to fall.
C) depository institutions to lend more freely.
D) foreign investors to buy more T-Bills.
E) None of the above.

Question

Quizplus · Accepted Answer

An increase in depository institutions' reserves means that they have more funds available to lend out. This, in turn, can lead to depository institutions lending more freely, as they have excess reserves to meet their reserve requirements.

An Increase in Depository Institutions' Reserves Will Cause