If the currency drain ratio increases, how can the Fed adjust the monetary base to offset the effect on the quantity of money?
What will be an ideal response?
If the currency drain ratio increases, the size of the money multiplier decreases, which decreases the quantity of money. To maintain the quantity of money at its initial amount by changing the monetary base, the Fed must increase the monetary base.
Economics
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An increase in the real exchange rate will cause
A) an increase in net exports. B) an increase in the quantity of imports. C) an increase in output. D) a decrease in government spending. E) all of the above
Economics
"Missing markets" result from
a. high transactions costs of such markets. b. strict price controls. c. the inability of producers to gain economies of scale. d. foreign countries dominating a domestic market for a product.
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