If the Fed Makes an Open Market Purchase of $1

question 146

Multiple Choice

If the Fed makes an open market purchase of $1 million of government securities,the monetary base

• A)is decreased by $1 million.
• B)is unchanged in size,though its composition changes.
• C)is increased by $1 million.
• D)will decrease by a multiple of $1 million over time.
• E)will increase by a multiple of $1 million over time.

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Definitions:

Consumer Equilibrium

A state where an individual has allocated their income in a way that maximizes their utility, given the prices of goods and services and their preferences.

Indifference Curves

Graphical representations in microeconomics that show different bundles of goods between which a consumer is indifferent.

Maximize Utility

The process of allocating resources to obtain the highest possible satisfaction or utility.

Consumer Equilibrium

A state in which consumers are maximizing their satisfaction, with no incentive to alter their allocation of expenses across goods or services.