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

question 8

Multiple Choice

If the Fed purchases $1 million worth of securities and the required reserve ratio is 8%, by how much will deposits increase (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:

Automatic Processes

Cognitive functions that occur without conscious awareness, often quickly, and with minimal effort.

Thought System

A coherent collection of beliefs and attitudes that shapes an individual's perception and thinking.

Symbolic Consciousness

Refers to the ability of humans to use symbols, such as language and other cultural products, to represent and understand reality.

Organisms

Living beings that can function independently, including animals, plants, bacteria, and fungi.