If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves
a. increase by $20 million and the money supply eventually increases by $400 million.
b. decrease by $20 million and the money supply eventually decreases by $400 million.
c. increase by $20 million and the money supply eventually increases by $100 million.
d. decrease by $20 million and the money supply eventually decreases by $100 million.
a
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Everything else held constant, the interest rate on municipal bonds rises relative to the interest rate on Treasury securities when
A) income tax rates are lowered. B) income tax rates are raised. C) municipal bonds become more widely traded. D) corporate bonds become riskier.
The contention that domestic unions tend to want to restrict foreign competition with tariffs is
A) a national defense concern. B) the infant industry argument. C) dumping. D) to protect domestic jobs.
The U.S. food and fiber industry
A) Includes farm input supply firms. B) Is one of the nation's most regulated sectors of the economy. C) Benefits from expansionary monetary policies. D) All of the above.
In the Keynesian model in the long run, a decrease in the money supply will cause
A) a decrease in output and an increase in the real interest rate. B) an increase in the real interest rate but no change in output. C) a decrease in the real interest rate and a decrease in output. D) no change in either the real interest rate or output.