Suppose the Fed sells $100 million of U.S. securities to the security dealers. If the reserve requirement is 20 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a:
a. $100 million decrease. b. $500 million increase.
c. $500 million decrease. d. $100 million increase.
c
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Last year your job at the university cafeteria paid you $9 an hour and the price of a music download was $1.00. This year your cafeteria job pays $9.90 per hour and download costs $1.10. You are clearly
A. worse off because of inflation. B. worse off because the download is now relatively more expensive. C. better off because your wage rate went up. D. better off because the download now costs less work.
Which of the following statements best describes what occurs when monetary authorities sell government securities?
A. The size of commercial banks' excess reserves decreases, the money supply decreases, and the interest rates rise, thereby causing a decrease in investment spending and real GDP. B. The size of commercial banks' excess reserves decreases, the money supply decreases, and interest rates rise, thereby causing an increase in investment spending and real GDP. C. The size of commercial bank reserves increases, the money supply increases, and interest rates fall, thereby causing an increase in investment spending and real GDP. D. The size of commercial banks' excess reserves decreases, the money supply increases, and interest rates fall, thereby causing a decrease in investment spending and real GDP.
In the long run, more costs become fixed
a. True b. False Indicate whether the statement is true or false
The deviation of unemployment from its natural rate is called
a. the normal rate of unemployment. b. deviant unemployment. c. cyclical unemployment. d. fluctuating unemployment.