Answer the Question on the Basis of the Information in the Following

question 52

Multiple Choice

Answer the question on the basis of the information in the following table. $\begin{array}{c}\begin{array}{c}\\\text {Money}\\\underline{\text { Supply}}\\ \$ 400 \\400\\400\\400\\400\end{array}\begin{array}{c}\\\text { Money }\\\underline{\text { Demanc }} \\ \$ 600 \\500 \\400 \\300 \\200\end{array}\begin{array}{c}\\\text { Interest}\\\underline{\text { Rate }} \\ 2 \% \\3 \\4 \\5 \\6\end{array}\begin{array}{c}\text {Investment }\\\text {(at Interest}\\\underline{\text { Rate Shown) }}\\\$ 700 \\600 \\500 \\300 \\200\end{array}\end{array}$
Refer to the table.Suppose the legal reserve requirement is 10 percent and initially there are no excess reserves in the banking system.If the Fed wished to reduce the interest rate by 1 percentage point,it would:

• A) sell $10 of government bonds in the open market.
• B) buy $100 of government bonds in the open market.
• C) sell $100 of government bonds in the open market.
• D) buy $10 of government bonds in the open market.

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