If the Fed Decides to Use an Open Market Operation

question 47

Multiple Choice

If the Fed decides to use an open market operation to reduce the money supply by $1 million, and if the money multiplier is 10, then what total amount of Treasury securities must the Fed initially sell?

• A) $10,000,000.
• B) $1,000,000.
• C) $100,000.
• D) $10,000.

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Definitions:

Political Choices

Decisions made within the political spectrum that reflect the preferences and ideologies of individuals, groups, or governments.

Rational-Ignorance Effect

A phenomenon where individuals decide not to acquire information because the cost of doing so outweighs the expected benefits.

Voters

Individuals who are eligible to vote in elections, making decisions about who will hold public office and on various issues.

Political Choices

Decisions made by individuals, groups, or governments that relate to the governance of a country, state, or local area.