Suppose the Fed Buys $100,000 of U

question 184

Multiple Choice

Suppose the Fed buys $100,000 of U.S. Treasury bonds from Bill Gates. 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) an increase by $100,000.
• B) an increase by $1,000,000.
• C) a decrease by $100,000.
• D) a decrease by $1,000,000.

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Definitions:

Capacity

In legal terms, the ability of an individual or entity to enter into a contract, often requiring them to be of legal age and sound mind.

Substantive Unconscionability

A principle in contract law where a contract or a specific term is so unfairly one-sided that it is deemed unconscionable and unenforceable.

Procedural Unconscionability

Refers to a situation in contract law where the manner in which a contract was formed is unfair or oppressive, often due to unequal bargaining power or lack of choice.

Adhesion Conscionability

Adhesion conscionability examines whether a contract, typically a "take-it-or-leave-it" deal presented by the stronger party to the weaker, is so one-sided that it is unfair to the weaker party and therefore unenforceable.