Suppose That the Fed Undertakes an Open Market Purchase of $15

question 168

Multiple Choice

Suppose that the Fed undertakes an open market purchase of $15 million worth of securities from a bank.If the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

• A) $180 million
• B) $12.5 million
• C) $18 million
• D) $125 million

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Definitions:

Overt Act

An action that is openly done and can be clearly proved as part of the commission of a crime or tort.

Bank Fraud Statute

A legal provision aimed at fighting fraudulent activities targeting financial institutions, including deception for financial gain against banks.

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are legal rights to possess, use, and dispose of assets or property.

Retribution

A principle of justice where the punishment is proportionate to the crime committed, aiming for moral balance.