Suppose the required reserve ratio is 10 percent, and the Fed buys $5 million worth of bonds from the public. If the public deposits this amount into transactions accounts, the money supply will
A. Not be affected directly, but an additional lending capacity of $50 million will be created for the banking system.
B. Increase directly by $5 million in reserve deposits, with an additional lending capacity of $40 million created for the banking system.
C. Increase directly by $5 million in reserve deposits, with an additional lending capacity of $45 million created for the banking system.
D. None of the choices are correct.
Answer: C
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Who said our economy "seems capable of remaining in a chronic condition of subnormal activity for a considerable period without any marked tendency either toward recovery or toward complete collapse"?
A. David Ricardo B. Jean Baptiste Say C. Wassily Leontief D. John Maynard Keynes
The speculative demand for money is the stock of money that people hold to:
a. pay their predictable, everyday expenses. b. pay for any unexpected expenses that may occur. c. buy stocks, bonds, and other financial assets. d. buy the foreign currencies needed to purchase imports.
The rational expectations hypothesis indicates that people:
a. pay little attention to policy when forming their expectations about the future. b. expect the next period to be pretty much like the recent past, regardless of policy changes. c. will always be able to forecast the future accurately. d. change their expectations about the future if policy changes.
Disinflation is like
a. slowing a car down, whereas deflation is like putting the car into reverse gear. b. maintaining a car's speed, whereas deflation is like slowing the car down. c. putting a car into reverse gear, whereas deflation is like slowing the car down. d. maintaining a car's speed, whereas deflation is like putting the car into reverse gear.