If the Fed Buys $32 Billion of U

question 138

Multiple Choice

If the Fed buys $32 billion of U.S.bonds in the open market and the reserve requirement is 10 percent,M1 will eventually

• A)Decrease by $32 billion.
• B)Increase by $32 billion.
• C)Decrease by $320 billion.
• D)Increase by $320 billion.

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Definitions:

Profit-maximizing

A strategy or approach that aims to achieve the highest possible profit from business activities.

Marginal Revenue

The revenue increase from selling an additional good or service unit.

Competitive Price-searcher

A market condition where firms have some control over pricing because their products are differentiated, but they must still consider competitors' prices in their pricing strategy.

Retail Selling

The process of selling goods or services directly to consumers through various channels, such as stores, online platforms, or by phone.