If the Federal Open Market Committee decides to expand the money supply, then it will
a. raise the discount rate to member banks.
b. issue directions to purchase government securities, thus putting more reserves in member banks.
c. issue directions to sell government securities, thus taking reserves from member banks.
d. order new Federal Reserve notes delivered to member banks.
b
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Which of the following statements is true of equilibrium?
A) Economic agents have an incentive to divert from equilibrium. B) Each economic agent can reach equilibrium irrespective of the actions of others. C) In equilibrium, the opportunity cost of the choices made by each economic agent is zero. D) In equilibrium, all economic agents are choosing the best feasible option simultaneously.
There is a flexible exchange rate system and only two countries in the world, the United States and Mexico. The real interest rate in the United States rises relative to the real interest rate in Mexico. It follows that
A) the dollar will depreciate and the peso will appreciate. B) the peso will depreciate and the dollar will appreciate. C) both the peso and the dollar are likely to appreciate. D) both the peso and the dollar are likely to depreciate.
You are asked to lend a friend $20,000 for a year. At the end of the year your friend agrees to pay you $21,000. The interest rate on this loan is
A. 4.50% B. 5.00%. C. 5.50%. D. indeterminate from this information.
Marco observed that every time the temperature rises above 90 degrees, he forgets to take out the trash. Based on this observation he concluded that temperatures above 90 degrees result in temporary memory loss. In actuality, Marco
A. committed the ceteris paribus error. B. showed good reasoning relating to the relationship between temperatures and memory. C. committed the fallacy of logic. D. was confusing causality.