If the Fed buys $10 million dollars in government securities, and the required reserve ratio is 20 percent, the banking system is able to expand the money supply by:
A. $10 million.
B. $50 million.
C. $2 million.
D. $40 million.
Answer: B
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If Treasury deposits at the Fed are predicted to ________, the manager of the trading desk at the New York Fed bank will likely conduct ________ open market operations to ________ reserves
A) rise; defensive; drain B) fall; defensive; drain C) rise; dynamic; inject D) fall; dynamic; drain
The attribute that distinguishes money from other assets is that only money
A) retains its value during times of inflation. B) is counted in determining the size of an individual's wealth. C) serves as a medium of exchange. D) may be used as collateral for a bank loan.
If forecasting errors are rational, then
A) people will always be error-prone. B) they will be random, and thus independent of previous errors. C) they will be independent of business firm production and price forecasts. D) A and C are both correct.
Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are
a. less of a concern for a monopoly than competitive market. b. offset by the higher profits earned by a monopolist. c. a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market. d. All of the above are correct.