When the desired reserve ratio is 10 percent, suppose the Fed buys $1,000,000 of government securities from banks. As a result, the banks' excess reserves

A) increase by $900,000.
B) increase by $1,000,000.
C) increase by $10,000.
D) decrease by $10,000.
E) decrease by $1,000,000.


B

Economics

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If the growth rates of nominal GDP and real GDP in an economy are 6% and 2% respectively, the inflation rate in the economy must be:

A) 2%. B) 8%. C) 4%. D) 3%.

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The profit-maximization assumption of economic theory does not fit reality because:

A. all real firms want to maximize long-term profits rather than short-run profits. B. all real firms want to maximize their share of the market. C. real-world firms have many goals, which depend on the incentive structure incorporated into the firm's organization. D. real-world firms have a single goal, but this goal has nothing to do with profits.

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