The reserve ratio is 20 percent. If the Fed buys $1 million of U.S. government securities and the check is deposited in Bank A, but Bank A increases its vault cash by the entire amount, then the money supply
A) does not increase.
B) increases by $800,000.
C) increases by $1 million.
D) increases by more than $1 million.
Ans: C) increases by $1 million.
Economics
You might also like to view...
In the long run, the currency of a country that has a higher inflation rate will appreciate against the currency of a country whose inflation rate is lower
a. True b. False
Economics
If a shift in aggregate demand only affects real Gross Domestic Product (GDP), then the short-run aggregate supply (SRAS) curve must be
A) upward sloping. B) downward sloping. C) horizontal. D) vertical.
Economics