Table 29-1Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars)
Banks
?
Federal Reserve System
?
Assets
Liab.
Assets
Liab.
Reserves +$10
?
U.S. Gov’t
Bank Reserves
U.S. Gov’t
?
Sec. +$10
+$10
Securities?$10
?
?
?
?
In Table 29-1, if the required reserve ratio is 10 percent, what will happen to the money supply? Use the oversimplified money multiplier in your calculations.
A. The money supply will decrease by $100 million.
B. The money supply will decrease by $10 million.
C. The money supply will not change.
D. The money supply will increase by $10 million.
E. The money supply will increase by $100 million.
Answer: E
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The implementation of the assembly line is an example of how
A) changes in the organization of production improve productivity. B) neutral technical change improves productivity. C) non-neutral technical change can decrease productivity. D) labor saving technical change increases economy-wide unemployment.
The quantity of money demanded to satisfy transactions needs
a. is intended for unexpected expenditures b. increases with the level of nominal GDP c. decreases with the level of nominal GDP d. is unrelated to either national income or the interest rate e. varies inversely with the liquidity demand for money.