Suppose the Fed buys $100,000 of U.S. Treasury bonds from Bill Gates. If the reserve requirement is 10 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be
a. an increase by $100,000.
b. an increase by $1,000,000.
c. a decrease by $100,000.
d. a decrease by $1,000,000.
B
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Which of the following holds true in a circular flow diagram?
A) Income flow are represented by drawing an arrow from the household sector to firms. B) Factor flows are represented by drawing an arrow from the firm sector to the household sector. C) Production flows are represented by drawing an arrow from the firm sector to the household sector. D) Expenditure flows are represented by drawing an arrow from the firm sector to the household sector.
Using the production function Real GDP = T (L, K), define the term production function and describe what each of the variables (T, L, and K) represents. When graphed with Real GDP on the vertical axis and labor on the horizontal axis, which variable(s) can shift the production function and which variable(s) can cause a movement along the production function?