If the Fed sells $10 million in bonds to a bank, and the legal reserve requirement is 20 percent, then the banking system will
a. decrease the money supply by $10 million
b. decrease the money supply by $40 million
c. decrease the money supply by $50 million
d. decrease the money supply by $2 million
e. increase the money supply by $50 million
C
You might also like to view...
In order for a production possibilities curve to shift to the right, which of the following must occur?
A) government involvement B) increasing consumer wants C) economic growth D) reductions in the supply of resources
The largest component of U.S. federal spending that contributes to the U.S. government budget deficit is
A. salaries of government employees. B. interest expenses. C. entitlements. D. military spending.
In an attempt to reduce the poverty rate, there has recently been a movement away from income maintenance programs to
A) Supplemental Security Income programs. B) reducing the age a person can retire at. C) encouraging people to get jobs. D) incorporating the Lorenz policy in decisions.
Economics is a study of
A) how to make money in the stock market. B) how to run a business successfully. C) the allocation of scarce resources. D) personal finance.