If the Fed Purchases $1 Million Worth of Securities and the Required

question 8

Multiple Choice

If the Fed purchases $1 million worth of securities and the required reserve ratio is 8%, by how much will deposits increase (assuming no change in excess reserves or the public's currency holdings) ?

• A)rise by $1 million
• B)decline by $1 million
• C)rise by $8 million
• D)rise by $12.5 million

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Definitions:

Water Molecule

A molecule consisting of two hydrogen atoms and one oxygen atom, essential for life and a universal solvent.

Oxygen Atom

The smallest particle of the element oxygen that retains its chemical properties, consisting of 8 protons, 8 neutrons, and 8 electrons.

Young Adult

An individual in the life stage following adolescence, typically ranging from late teens to early thirties, characterized by physical maturity and the pursuit of independence.

Mole

A unit in chemistry used to express amounts of a chemical substance, based on the number of atoms or molecules.