Table 29-1 Effects of an Open-Market Transaction on the Balance

question 4

Multiple Choice

Table 29-1 Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars) In Table 29-1, if the required reserve ratio is 10 percent, what will happen to the money supply? Use the oversimplified money multiplier in your calculations.

• A) The money supply will decrease by $100 million.
• B) The money supply will decrease by $10 million.
• C) The money supply will not change.
• D) The money supply will increase by $10 million.
• E) The money supply will increase by $100 million.

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Definitions:

Organic Product

A compound containing carbon that has been formed as the result of a chemical reaction involving organic molecules.

Reaction

A method where substances combine and transform into one or more distinct substances possessing unique chemical and physical characteristics.

Organic Product

A natural substance or compound obtained through biochemical processes from organisms or their parts.

Reaction

A process in which substances interact to form new substances with different properties, involving a reorganization of atoms or molecules.