Explain the difference between the effects of a reduction in legal reserve requirements and the effects of an open-market purchase of securities by the Fed
The difference lies in the fact that an open-market purchase creates new reserves, which are deposited into
the banking system and which in turn creates a multiple expansion in the money supply. Lowering the
reserve requirement, while not creating new reserves allows the banking system to generate a larger
potential money multiplier that may increase the money supply.
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The concept of vertical equity is that
a. income should be taxed instead of property. b. property should be taxed instead of income. c. there should be little movement up or down the social scale. d. persons who are unequal should be treated unequally.
Kara and Kyle are competing sockeye salmon fishers. Both have been allocated ITQs that limit their catch to 2,000 tons of sockeye salmon each. Kara's cost per ton is $8; Kyle's cost per ton is $12. Refer to the information given. If the market
price of sockeye salmon is $15 per ton, what is the minimum amount per ton that Kara would have to offer Kyle to convince him to sell Kara his ITQs? A. $3. B. $4. C. $5. D. $7.