If a bank advertises 3 percent interest for a checking account and the anticipated rate of inflation is 3.5 percent
A. the real rate of interest earned on the account is 3.25 percent.
B. the real rate of interest earned on the account is 0.5 percent.
C. the real rate of interest earned on the account is 6.5 percent.
D. the real rate of interest earned on the account is -0.5 percent.
Answer: D
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If the Fed injects reserves into the banking system and they are held as excess reserves, then the money supply
A) increases by only the initial increase in reserves. B) increases by only one-half the initial increase in reserves. C) increases by a multiple of the initial increase in reserves. D) does not change.