When the Fed buys a U.S. bond in the open market
A) its action contracts total reserves and the money supply.
B) total reserves increase by the amount of the purchase but the money supply stays the same.
C) its action expands total reserves and the money supply.
D) its action has no effect on the total reserves or the money supply because the check it writes increases reserves at one bank but they fall at another.
C
You might also like to view...
Assume all capital is owned by firms, rather than by households. Under this assumption, capital is paid according to the value of its marginal product
a. only if this income is transmitted to households in the form of interest. b. only if this income is transmitted to households in the form of dividends. c. only if this income is transmitted to households in the form of interest or dividends. d. regardless of whether this income is transmitted to households in the form of interest or dividends or whether it is kept within firms as retained earnings.
The accountants hired by the Brookside Racquet Club have determined total fixed cost to be $75,000 . total variable cost to be $130,000 . and total revenue to be $125,000 . Because of this information, in the short run, the Brookside Racquet Club should
a. shut down because staying open would be more expensive. b. lower their prices to increase their profits. c. stay open because shutting down would be more expensive. d. stay open because the firm is making an economic profit.