If the Fed sells a T-bill to an individual rather than to a commercial bank, how will this affect the money supply?
a. It will increase the money supply.
b. It will increase the checking account balance of the individual.
c. It will have no effect on the money supply.
d. It will decrease the money supply.
d
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According to the textbook, demand and supply determine prices, and prices allocate scarce resources in the economy.
a. true b. false
A risk-averse manager is hired to run a firm for shareholders. If shareholders cannot observe the manager's effort, which would be the best employment contract?
a. a high-powered incentive contract to elicit maximum effort. b. a fixed salary. c. a moderately powered incentive scheme that elicits some effort without exposing the manager to too much risk. d. an incentive scheme that provides maximum incentives and maximum insurance.