Assume the Reserve Requirement Is 25% and the Federal Open

question 46

Multiple Choice

Assume the reserve requirement is 25% and the Federal Open Market Committee buys $4 million of U.S. government bonds from the public. As a result of this transaction, the supply of money is

• A) not directly affected but has the potential to be increased by a total of $12 million.
• B) directly increased by $4 million and has the potential to be increased by another $12 million.
• C) directly reduced by $4 million and has the potential to be reduced by another $12 million.
• D) directly increased by $4 million and has the potential to be increased by another $8 million.

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Definitions:

Edward L. Thorndike

A prominent American psychologist known for his work in behaviorism and the development of the Law of Effect, which suggests that responses to stimuli that are followed by satisfaction are more likely to recur.

Environmental Contingencies

External conditions or situations that affect the outcome of certain behaviors or processes.

Cognitive Maps

The mental representations of physical locations, spaces, or the environment that an individual has.

Animal Learning

The process by which animals acquire new behaviors through interaction with their environment, often studied to understand cognitive processes.