Suppose That the Fed Undertakes an Open Market Sale,selling $1

question 102

Multiple Choice

Suppose that the Fed undertakes an open market sale,selling $1 million worth of securities to a bank.If the required reserve ratio is 8%,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; $12.5
• B) decline; $8
• C) decline; $12.5
• D) rise; $8

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Definitions:

Bell Jar

A piece of laboratory equipment resembling a bell, typically made of glass, used to create vacuums or to contain gases.

Human Lungs

The human lungs are a pair of large, spongy organs located in the chest, responsible for gas exchange between the blood and the environment.

Rubber Covering

A protective layer made of rubber material, used to enhance grip, insulation, or waterproofing of objects.

Pneumothorax

The presence of air or gas in the cavity between the lungs and the chest wall, causing collapse of the lung.