Suppose the Fed Carries Out an Open Market Purchase and Credits

question 46

Multiple Choice

Suppose the Fed carries out an open market purchase and credits the account of a bank by $160,000. Further suppose that the reserve ratio (RR) is 10%. By how much is the money supply expected to change?

• A) $160,000
• B) $1.6 million
• C) $16 million
• D) $1.76 million

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Definitions:

Withdrawal Symptoms

Physical or psychological signs that occur after stopping or reducing intake of a substance that is habitually used.

Intense "Rush"

A sudden and powerful sensation or emotion, often associated with excitement, adrenaline, or the effects of certain substances.

Harm Reduction

A public health strategy aimed at minimizing the negative health, social, and legal impacts associated with drug use, sexual activity, and other risky behaviors.

Drug Abuse

The harmful or hazardous use of psychoactive substances, including alcohol and illicit drugs.