If the supply of money increases as a result of an open market ______ of securities by the Fed, the interest rate will ______.
a) sale; increase
b) sale; decrease
c) become flatter
d) none of the above
Answer: d) none of the above
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Assuming all excess reserves are loaned out, currency holdings by the public are zero, and a reserve ratio of 2 percent, an initial deposit of $500 will lead to a total increase in deposits of
A) $250. B) $5,000. C) $25,000. D) $50,000.
The ability to produce a good at a lower opportunity cost than another producer is called
A) absolute advantage. B) comparative advantage. C) specialization. D) protectionism.
Assume that a security has equally possible outcomes of yielding 8 percent and 4 percent. The standard deviation of the probability distribution of returns for this security is
A) 6 percent. B) 4 percent. C) 3 percent. D) 2 percent.
When producing a good generates negative externalities, the private market for that good tends to produce too:
A. little of the product at too low a price. B. little of the product at too high a price. C. much of the product at too low a price. D. much of the product at too high a price.