If the Fed Purchases $1 Million Worth of Securities and the Required

question 69

Multiple Choice

If the Fed purchases $1 million worth of securities and the required reserve ratio is 8%,by how much will deposits change (assuming no change in excess reserves or the public's currency holdings) ?

• A) rise by $1 million
• B) decline by $1 million
• C) rise by $8 million
• D) rise by $12.5 million

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Definitions:

Short-Term Memory Tasks

Cognitive tasks that require the temporary holding and processing of information over a short period, typically seconds to a minute.

Short-Term Memory

A cognitive system with a limited capacity that is capable of temporarily holding information available for processing.

Encoding

The initial process of transforming sensory input into a form or format that can be stored in memory.

Rehearsing

The act of practicing or repeating information to aid in memory retention.