If the M1 Multiplier Is 3 and the Fed Engages

question 26

Multiple Choice

If the M1 multiplier is 3 and the Fed engages in open-market sales in the amount of $3 billion, then M1 will

• A)increase by $1 billion.
• B)decline by $1 billion.
• C)decline by $9 billion.
• D)increase by $9 billion.

---

Definitions:

Balance Sheet

A financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial report that shows a company's revenue, expenses, and profits over a specific period of time.

Profit Margin

A financial metric used to assess a company's profitability by dividing net income by revenue.

Net Income

is the amount of money that remains after all expenses, taxes, and costs have been subtracted from a company's total revenue, also known as the bottom line.