If the Fed Buys $150 Billion of U

question 24

Multiple Choice

If the Fed buys $150 billion of U.S.bonds in the open market and the reserve requirement is 5 percent,M1 will eventually

• A)Increase by $3,000 billion.
• B)Decrease by $3,000 billion.
• C)Increase by $300 billion.
• D)Decrease by $300 billion.

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Definitions:

Contract

A contract that is legally enforceable involving two or more parties.

Investments

Allocation of monetary resources with the intention of securing a return or profit.

Compounded Monthly

A method of calculating interest whereby the interest is added to the principal each month, and the following month's interest is calculated on the increased total.

Monthly Payments

Regular payments made every month, commonly associated with loans or lease agreements, to repay or maintain a financial obligation.