Suppose That the Fed Undertakes an Open Market Purchase of $5

question 97

Multiple Choice

Suppose that the Fed undertakes an open market purchase of $5 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)$4.17 million
• B)$7.95 million
• C)$5.68 million
• D)$41.67 million

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Definitions:

THC

The principal psychoactive constituent of cannabis, responsible for most of the plant's psychological effects.

Immediate Recall

Refers to the ability to remember and reproduce information that has just been experienced.

Methadone

A synthetic opioid used for pain management and as part of drug addiction detoxification and maintenance programs.

Cocaine

A powerful stimulant drug derived from the leaves of the coca plant, often used recreationally and known for its addictive properties.