Assume that the reserve requirement is 25%. If the Federal Reserve sells $120 million in government securities to the general public, the money supply will immediately ________.
A. increase by $120 million with this transaction, and the increase in money supply could eventually reach a maximum of $480 million
B. increase by $120 million with this transaction, and the increase in money supply could eventually reach a maximum of $360 million
C. decrease by $120 million with this transaction, and the decrease in money supply could eventually reach a maximum of $480 million
D. decrease by $120 million with this transaction, and the decrease in money supply could eventually reach a maximum of $360 million
Answer: C
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The decrease in supplies of gasoline led to a run up in prices. Many voters clamored for relief by calling on their congressman and senators to enact temporary price controls. Analyze the impact on the gasoline market that would have transpired had politicians actually headed the calls by voters to impose price controls on gasoline.
Data show that in the U.S. since 1915, the velocity of M1 money
a. has been highly stable at approximately 24 b. has increased at about 3 percent per year c. has been erratic, varying between about 2 and 6 d. increased steadily until the 1960s, then decreased sharply thereafter e. has stayed fairly constant at approximately 4
If money is moved from a consumer savings account into a consumer checking account,
A. M1 decreases and M2 increases. B. M1 increases and M2 remains unchanged. C. M1 and M2 both decrease. D. M1 and M2 both increase.
The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.