If the Fed Buys $2 Billion of Short-Term Securities Issued

question 79

Multiple Choice

If the Fed buys $2 billion of short-term securities issued by the Bank of Japan and pays for them by writing a check for $2 billion,

• A)its assets will rise by $2 billion and the monetary base will rise by $2 billion.
• B)its assets will fall by $2 billion and the monetary base will fall by $2 billion.
• C)its assets will rise by $2 billion and the monetary base will fall by $2 billion.
• D)its assets will fall by $2 billion and the monetary base will rise by $2 billion.

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Definitions:

Labor Demand Elasticity

The sensitivity of employers' demand for labor to changes in the price or cost of labor, reflecting how much the quantity of labor demanded responds to changes in wages.

Total Costs

The cumulative costs associated with the complete process of producing and selling a product or service.

Labor Cost

The total expenditure incurred by employers for the wages, benefits, and taxes of their workforce.

Marginal Revenue Productivity

The additional revenue generated by hiring one more unit of a factor of production, such as labor.