Suppose the reserve requirement is 20 percent and banks hold no excess reserves. A $1 billion purchase of government securities by the Fed will:
A. reduce the potential amount of checkable deposits in the banking system by $1 billion.
B. reduce the potential amount of checkable deposits in the banking system by $5 billion.
C. increase the potential amount of checkable deposits in the banking system by $1 billion.
D. increase the potential amount of checkable deposits in the banking system by $5 billion.
Answer: D
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At an equilibrium price, quantity demanded
A. exceeds quantity supplied. B. equals quantity supplied. C. is less than quantity supplied. D. Any of the above is possible.
If a nonrenewable natural resource's price is expected to increase at a rate faster than the interest rate, then the supply today will
A) the supply today will increase. B) the supply today will decrease. C) the demand today will decrease. D) the price today will fall.
Suppose the marginal propensity to consume (MPC) is 0.9 and there is a $3,000 increase in planned investment. Given this information, real GDP will increase by
A) $3,000. B) $2,700. C) $30,000. D) $3,333.
In addition to advising the president, one duty of the Council of Economic Advisers is to
a. prepare the federal budget. b. write government regulations. c. advise Congress on economic matters. d. write the annual Economic Report of the President.