Contractionary monetary policy is achieved? by:
A) decreasing the amount of bank reserves and lowering the federal funds rate.
B) decreasing the amount of bank reserves and raising the federal funds rate.
C) increasing the amount of bank reserves and lowering the federal funds rate.
D) increasing the amount of bank reserves and raising the federal funds rate.
Answer: B) decreasing the amount of bank reserves and raising the federal funds rate.
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Suppose the reserve ratio is RR. Then,
A) required reserves = RR × excess reserves. B) required reserves = RR × loans. C) required reserves = RR × deposits. D) required reserves = RR × actual reserves.
As the price of video games is raised from $40 to $45, their quantity demanded fell from 1.5 million copies to 1.2 million copies. The elasticity of demand of video games is:
a. 0.25 b. 1.89 c. 1.66 d. 2.08