Suppose That the Fed Undertakes an Open Market Sale,selling $3

question 5

Multiple Choice

Suppose that the Fed undertakes an open market sale,selling $3 million worth of securities to a bank.If the required reserve ratio is 11%,checkable deposits (or the money supply) ,would _______________ by ________________ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

• A) rise; $27
• B) decline; $33
• C) decline; $27
• D) rise; $33

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Definitions:

Decision-making Authority

The power or right to make decisions within an organization, group, or system.

Free Rider

An individual who benefits from the goods, services, or advantages provided by a group without contributing to the cost or effort involved.

Agency Shop Agreements

Labor agreements that require employees to either join the union or pay a fee equivalent to union dues, even if they choose not to become union members.

Fair Representation

The legal duty of a union to represent all members impartially and effectively, especially in negotiations and grievance processes.