If the Federal Reserve Sells $1,000 in Bonds And,as a Result,the

question 126

Multiple Choice

If the Federal Reserve sells $1,000 in bonds and,as a result,the money supply decreases by $2,500,what is the required reserve ratio?

• A) 0.4
• B) 2.5
• C) 0.5
• D) 0.1
• E) 0.2

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Definitions:

John Maynard Keynes

An influential British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

Expansionary Gap

A situation where actual output in an economy exceeds the potential output, leading to inflationary pressures due to high demand.

Government Spending

The total amount of money that a government allocates and uses on public services and infrastructure.

Real GDP

The measure of a country's economic output adjusted for price changes (inflation or deflation), reflecting the actual value of goods and services produced.