How does an open market operation change the monetary base?
What will be an ideal response?
The monetary base is the sum of coins, Federal Reserve notes, and depository institution deposits at the Federal Reserve, that is, banks' reserves. When the Federal Reserve conducts an open market operation, it either buys securities and pays for them with newly created reserves or it sells securities and is paid with reserves held by banks. In both cases the monetary base changes. In the first case, when the Fed buys securities, the monetary base increases. In the second case, when the Fed sells securities, the monetary base decreases.
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The concept of "economic pessimism" stems from
A) the theory and empirical fact which states that developing nations face declining export prices relative to increasing import prices. B) the fact that economic growth in an era of globalization is difficult to attain. C) the fact that smaller countries would not enjoy comparative advantage unless they are allowed to subsidize some of their industries. D) the fact that it is impossible to achieve desired economic development without adopting full democratic principles. E) None of the above.
If marginal revenue product is less than price of the input, the firm should use more of the input.
Answer the following statement true (T) or false (F)
Outsourcing is
A) only beneficial to a few select countries. B) another way for residents of different nations to conduct trade with one another. C) not beneficial to any country. D) not beneficial to the consumers who purchase outsourced goods.
Since World War II, world trade has
A. risen sharply, outpacing gains in annual world real GDP. B. increased in relative importance for most nations, but not for the United States. C. decreased in importance as nations turn inward due to security concerns. D. increased, but not as dramatically as annual world real GDP has climbed.