Assume the required reserve ratio is 20 percent and the FOMC orders an open market purchase of $100 million in government securities from member banks. If the oversimplified money multiplier is assumed, then the money supply will
a. increase by $500 million.
b. increase by $100 million.
c. decrease by $100 million.
d. decrease by $500 million.
a
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Use the following diagram to answer the next question.
Which of the following would cause a move from MS1 to MS2?
A. The banking system decides to hold less excess reserves and make more loans. B. The federal funds rate increases. C. The discount rate is increased by the regional Federal Reserve banks. D. The Federal Open Market Committee decides to sell bonds.
Consider a market in which each firm must predict the price and quantity decisions of other firms, as well as how those price and quantity decisions will affect the first firm's revenue and profit. This market is best described as
A) an oligopoly. B) monopolistic competition. C) a monopoly. D) perfect competition.
Economics is:
a. concerned with the problem of scarce resources combined with unlimited wants. b. the study of how to make money in the stock market. c. highly theoretical and has little practical application. d. primarily concerned with day-to-day business decision making. e. a decision making process involving individuals and firms rather than governments.
Discuss the impact of efficiency wages on unemployment and wage inflexibility