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.

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Definitions:

Self-Incrimination

The act of implicating oneself in a crime, often discussed in the context of the right against self-incrimination in legal proceedings.

Pervasive-Regulation Exception

An exception in law that applies when a business is heavily regulated by the government, therefore some usual legal protections may not apply to that business in the same way they do others.

Administrative Searches

Searches conducted by officials (e.g., health inspectors, safety regulators) as part of their regulatory duties without the need for a warrant.

Free-Exercise Clause

A clause in the First Amendment of the U.S. Constitution which states that government (state and federal) cannot make a law "prohibiting the free exercise" of religion; has been interpreted as including absolute freedom to believe and freedom to act, which may face state restriction.