Refer to Exhibit 13-1

question 41

Multiple Choice

Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.At the end of this process of money creation,what equation would be used to determine the total amount of new checkable deposits?

• A) simple deposit multiplier x change in reserves resulting from the initial injection of funds
• B) 1/r x change in reserves resulting from the initial injection of funds
• C) r x change in reserves resulting from the initial injection of funds
• D) 1/r
• E) a or b

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Definitions:

South Dakota

A state located in the Midwestern region of the United States, known for landmarks like Mount Rushmore.

Texas

A state located in the southern region of the United States, known for its large size and diverse landscapes.

Sedimentary Cycle

Biochemical cycle such as the phosphorus cycle, in which the atmosphere plays little role and rocks are the major reservoir.