A $10 Million Open Market Sale Will Decrease the Reserves

question 2

Multiple Choice

A $10 million open market sale will decrease the reserves of the banking system by

• A)$10 million.
• B)$10 million times the money multiplier.
• C)$10 million divided by the money multiplier.
• D)an amount between $0 and $10 million, depending on the fraction of the sale the public wishes to hold as currency.

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Definitions:

General Adaptation Syndrome

A model describing the body's short-term and long-term reactions to stress, consisting of three stages: alarm, resistance, and exhaustion.

Resistance Stage

The second stage of the general adaptation syndrome (GAS), in which the body adapts to a stressor.

Exhaustion Stage

The final stage of the general adaptation syndrome (GAS), in which the body’s ability to resist a stressor has been depleted.

Alarm Stage

The initial phase of the stress response, where the body recognizes a threat and prepares to face or flee from it, activating the fight-or-flight response.