If the Fed Injects Reserves into the Banking System and They

question 35

Multiple Choice

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.

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Definitions:

World Production

The total output of goods and services produced by all countries around the globe.

Autarky

A situation in which a country does not trade with other countries.

Comparative Advantage

The advantage conferred on an individual or country in producing a good or service if the opportunity cost of producing the good or service is lower for that individual or country than for other producers.

Absolute Advantage

The advantage conferred on an individual or country in an activity if the individual or country can do it better than others. A country with an absolute advantage can produce more output per worker than other countries.