When the Fed purchases government securities, it
A. increases banks' reserves and makes possible an increase in the money supply.
B. decreases banks' reserves and makes possible a decrease in the money supply.
C. automatically raises the discount rate.
D. uses discounting operations to influence margin requirements.
e. has no effect on either the money supply or the discount rate.
increases banks' reserves and makes possible an increase in the money supply
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To combat inflation, Congress and the president should
A) increase transfer payments. B) decrease taxes. C) decrease government spending. D) raise interest rates.
In the case of negative externalities in production, the firm's internal costs:
a. exceed the external costs. b. are less than the external costs. c. equal the external costs. d. understate the true cost of producing the product. e. overstate the true cost of producing the product.
Which of the following is true of the consumption function? a. A decrease in flat tax results in an upward shift of the consumption function
b. An increase in interest rates results in an upward rotation of the consumption function. c. An increase in the expected future income results in an upward rotation of the consumption function. d. A decrease in the marginal propensity to save results in a downward shift of the consumption function.
Suppose that an economy produces food and clothing, and a technological innovation occurs that enhances the productivity of resources used in producing both goods. Which of the following would be consistent with this situation?
a. There is a parallel outward shift of the PPF. b. The PPF rotates outward along the food axis, and remains fixed at the point of maximum clothing production. c. The PPF rotates outward along the clothing axis, and remains fixed at the point of maximum food production. d. There is a parallel inward shift of the PPF.