A purchase of U.S. government securities by the Fed causes
A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased.
B. a multiple expansion of the money supply because the reserve ratio is less than one.
C. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system.
D. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system.
Answer: B
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Which of the following is included in Germany's GDP?
i. BMWs produced in a German-owned factory in South Carolina ii. the value of the stocks sold on the German stock exchange, the Frankfurt Stock Exchange iii. china produced by the English-owned Wedgewood Company at a factory in Berlin, Germany A) i and iii B) ii only C) iii only D) i and ii E) None of the above answers is correct.
Under adaptive expectations theory, people expect the rate of inflation this year to be:
a. zero, regardless of the rate last year. b. the same as last year. c. the rate based on predictable and fiscal policies. d. All of these.
Those who advocate a return to a real gold standard believe that doing so would
A. force countries to pursue sustainable fiscal policies. B. allow countries to earn a higher rate of interest on their holdings of international reserve assets. C. reduce inflation rates by imposing strong discipline on national monetary authorities. D. reduce unemployment rates by allowing countries to have independent monetary policies.
Suppose you have a fixed amount of income to spend on two goods, X and Y. The price of good X is Px = $10, and the price of good Y is Py = $5. The marginal utility of X is MUx = 60 utils, and the marginal utility of Y is MUy = 15 utils. How should consumption of X and Y change, if at all, to increase utility?
What will be an ideal response?