Assume that the reserve requirement for the commercial banks is 25%. If the Federal Reserve Banks buy $3 billion in government securities, the lending ability of the commercial banking system will increase by ________.
A. $12 billion
B. $15 billion
C. $9 billion
D. $4.5 billion
Answer: A
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The ________ of the term structure of interest rates states that the interest rate on a long-term bond will equal the average of short-term interest rates that individuals expect to occur over the life of the long-term bond, and investors have no
preference for short-term bonds relative to long-term bonds. A) segmented markets theory B) expectations theory C) liquidity premium theory D) separable markets theory
Suppose the economy is producing at the natural rate of output. A decrease in consumer and business confidence will cause ________ in real GDP in the short run and ________ in inflation in the short run, everything else held constant
A) an increase; an increase B) a decrease; a decrease C) no change; an increase D) no change; a decrease
Figure 11-2
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In Figure 11-2, which movement would represent an improvement for all individuals?
A. A to B B. C to AC C. D to B D. A to D
If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?
A. The quantity of milk demanded will increase. B. The quantity of milk supplied will decrease. C. There will be a surplus of milk. D. There will be a shortage of milk.