If the money multiplier is 2.5 and the Fed buys $8 million in securities on the open market, transaction deposits could potentially
A. decrease by $25 million.
B. increase by $25 million.
C. decrease by $20 million.
D. increase by $20 million.
Answer: D
You might also like to view...
When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
Tony spends $36 per month on cookies. For him, chocolate chip cookies and peanut butter cookies are perfect substitutes. Chocolate chip cookies are $4 per dozen and peanut butter cookies are $3 per dozen
How many dozen of each type of cookie will Tony buy in a given month if he wants to maximize his utility?
If a country wants to keep the value of its currency fixed, then its central bank should
A) sell domestic goods when there is an increase in the supply of its domestic currency. B) buy domestic goods when there is an increase in the supply of its domestic currency. C) sell its domestic currency when there is an increase in the supply of that currency. D) buy its domestic currency when there is an increase in the supply of that currency.
Which of the following would raise both the equilibrium price and the equilibrium quantity of strawberries?
a. A decrease in the demand for strawberries. b. An increase in the demand for strawberries. c. A decrease in the supply of strawberries. d. An increase in the supply of strawberries.