Extension of Loans and Interest on Excess Reserves

Discussion in 'Economics' started by judemartin99, Mar 20, 2013.

  1. Sam and Rosa would like you to tell them who has the correct understanding of monetary policy. Sam claims that the Federal Reserve (the "Fed") could implement an expansionary monetary policy by extending fewer loans to financial institutions. Rosa claims that the Fed could implement the same policy by increasing the interest rate it pays on excess reserves.

    Who has correctly determined how the Fed could shift toward an expansionary monetary policy?

    a. Only Sam is correct.
    b. Neither Sam nor Rosa is correct.
    c. Only Rosa is correct.
    d. Both Sam and Rosa are correct.

    hey fellas who do you think is correct? Im thinking the answer is C.