The reserve ratio is 2 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply
A. increases by $1 million.
B. increases by more than $1 million.
C. increases by $980,000.
D. does not increase.
Answer: A
You might also like to view...
Refer to Table 5.1. What is Andrea's opportunity cost of producing one bracelet?
A) 1/6 of a tiara B) 2/3 of a tiara C) 6 tiaras D) 7.5 tiaras
In the table above, Jill's opportunity cost for 1 pound of food is ________ and her opportunity cost for 1 pound of clothing is ________
A) 1 pound of clothing; 4 pounds of food B) 1/2 of a pound of clothing; 2 pounds of food C) 1/3 of a pound of clothing; 3 pounds of food D) 2 pounds of clothing; 2 pounds of food E) 1 pound of food; 1 pound of clothing
Analyze the following statement, and show what would happen in the long run if such advice were followed by the Fed: "The increase in the stock market has increased people's wealth
As a result, their consumption has increased, increasing aggregate demand and output. So the Fed needs to increase the money supply, since with higher income, people's demand for real money balances will be higher."
Refer to the above graph. If the production possibilities curve for an economy is at CD but the economy is operating at point X, the reasons are most likely to be because of:
A. Technological progress and industrial change
B. Increases in the quantity and the quality of resources
C. Improvement in labor productivity and the number of work-hours
D. Unemployment and inefficient allocation of resources