Suppose that the actual money multiplier equals the maximum potential money multiplier. If the reserve ratio is 10 percent, in order for the banking system to increase deposits by $2.5 million, the Fed must
A) permit the system to have prolonged reserve deficiencies.
B) sell $2.5 million of government securities to the general public.
C) sell $250,000 of government securities to the general public.
D) buy $250,000 of government securities from the public.
Answer: D) buy $250,000 of government securities from the public.
Economics
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The table above gives four production possibilities for airplanes and cruise ships. In possibility A, how many resources are devoted to the production of airplanes?
A) 0 B) few C) most D) all E) It is impossible to tell without more information about the prices of airplanes and cruise ships.
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According to the theory of comparative advantage, trade and specialization ________ productivity by ________ opportunity costs.
A. lower; lowering B. lower; raising C. raise; lowering D. raise; raising
Economics