Explain how each of the following events affects the money supply. (a) An increase in income tax
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(a) An increase in income tax rates induces the public to conduct more of its business in currency to hide earnings.
(b) An increase in interest rates encourages the public to hold less currency.
(c) Banks obtain discount loans from the Fed.
(d) Increasing uncertainty about deposit withdrawals leads banks to hold on to excess reserves.
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