Suppose the Fed Purchases $10 Million of U

question 43

Multiple Choice

Suppose the Fed purchases $10 million of U.S. securities from the public. If the reserve requirement is 10 percent, the currency holdings of the public are unchanged, and banks have zero excess reserves both before and after the transaction, the total impact on the money supply will be a

• A) $10 million decrease in the money supply.
• B) $10 million increase in the money supply.
• C) $100 million decrease in the money supply.
• D) $100 million increase in the money supply.

---

Definitions:

Rate of Diffusion

Rate of Diffusion refers to how quickly molecules spread from areas of high concentration to areas of low concentration, influenced by temperature, pressure, and the medium.

Viscosity

A measure of a fluid's resistance to flow, indicating its thickness or thinness.

Temperature

A physical quantity expressing the subjective perceptions of hot and cold, measured in degrees according to various scales (e.g., Celsius, Fahrenheit).

Hypotonic Sweat

Sweat that contains a lower concentration of solutes (mainly salt) than the surrounding tissues, often resulting from acclimatization to hot conditions.