CFA Practice Question

CFA Practice Question

Which of the following is correct?
A. An increase in the reserve ratio ceteris paribus (other things unchanged) will lead to an increase in money supply.
B. Central banks seek to increase interest rates when they fear their economies are threatened by rising inflation.
C. Increased purchases of Treasuries by the FED should lead to a rise in interest rates.
Explanation: An increase in the reserve ratio (other things unchanged) will lead to an decrease in money supply. Increased purchases of Treasuries by the FED should lead to a fall in interest rates.

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