When fed decreases the interest rate paid on reserves

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Reference no: EM131236803

When the Fed decreases the interest rate paid on reserves, if the ratio of currency to deposits decreases also while the monetary base is constant, then:

a) the money supply decreases.

b) the money supply increases.

c) the two changes exactly offset each other.

d) it cannot be determined whether the money supply increases or decreases.

Please explain your thought process and not just answer the question.

Reference no: EM131236803

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