Assume that the required reserve rate is ten percent, banks want to hold excess reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash. An open market purchase of $1 million by the Fed will see banking system deposits increase by:
A. more than $1 million but less than $10 million.
B. more than $10 million but less than $20 million.
C. less than $1 million.
D. exactly $1 million.
Answer: A
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For each of the following transactions, explain what happens to the merchandise trade balance, current account balance, and financial account balance in both the United States and Mexico. The exchange rate is 2 Mexican pesos per U.S. dollar
(a) A Mexican firm spends 4 million pesos to buy radiology equipment from a U.S. firm. (b) A U.S. firm buys 20,000 sombreros at 20 pesos each. (c) Mexican computer firms send 200 programmers to universities in the United States, paying tuition and expenses of $3000 each. (d) A Mexican entrepreneur gives 50,000 pesos to the United Way of San Antonio, Texas. (e) Mexican investors buy $10 million worth of 30-year U.S. Treasury bonds.
People who are the most willing to pay high interest rates for loans may have bad credit ratings. This is an example of:
A. moral hazard. B. an experience rating. C. adverse selection. D. a negative spillover.
Recall the Application about the effect of global warming on economic growth to answer the following question(s). According to this Application, the economic effects of increases in temperature seem to:
A. be confined to poorer countries. B. be confined to richer countries. C. be equal across all countries. D. be nonexistent in most countries.
If the marginal product of a worker for a hearing aid manufacturer is 6 hearing aids, and the price of a hearing aid is $300, the firm?s marginal revenue product is
A. $50. B. $300. C. $1,800. D. $18,000.