Table 142
Monetary Aggregates of the U

question 125

Multiple Choice

$\begin{array}{|l|r|}\hline{\text { Item }} &{\text { Amount }} \\\hline \text { Cash held by public } & \$ 100 \text { billion } \\\hline \text { Transactions deposits } & \$ 300 \text { billion } \\\hline \text { Required reserves } & \$ 30 \text { billion } \\\hline \text { Excess reserves } & \$ 0 \text { billion } \\\hline \text { U.S. bonds held by public } & \$ 475 \text { billion } \\\hline\end{array}$
Table 14.2
Monetary Aggregates of the U.S. Financial System Assume an original balance sheet: Refer to Table 14.2.If the Fed sells $20 billion in bonds to the public,all of the following are true except

• A)The public will hold $495 billion worth of bonds.
• B)M1 will decrease initially by $20 billion.
• C)M2 will expand initially by $20 billion.
• D)None of the choices are correct.

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Definitions:

Encoding

In psychology, the process of converting information into a form that can be stored in memory, initiating the process of creating a new memory.

Selective Attention

The cognitive process of focusing on a particular object or task, while ignoring irrelevant information.

Cognitive Abilities

Mental capabilities involved in learning, reasoning, problem solving, and adapting to new situations.

Encoding

The first step of transforming data into a format that can be preserved in memory.