In December 1999 People Feared That There Might Be Computer

question 87

Multiple Choice

In December 1999 people feared that there might be computer problems at banks as the century changed.Consequently,people wanted to hold relatively more in currency and relatively less in deposits.In anticipation banks raised their reserve ratios to have enough cash on hand to meet depositors' demands.These actions by the public

• A)would increase the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply,it could have sold bonds.
• B)would increase the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply,it could have bought bonds.
• C)would reduce the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply,it could have sold bonds.
• D)would reduce the multiplier.If the Fed wanted to offset the effect of this on the size of the money supply,it could have bought bonds.

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Definitions:

Marginal Rate

Often referred to as the marginal rate of substitution or the marginal tax rate, indicating the rate at which one can trade off one good for another or the tax rate on the next dollar earned, respectively.

Substitution

Substitution refers to the economic principle where consumers replace more expensive items with less expensive ones or firms replace inputs with cheaper alternatives, in response to changes in price or availability.

Videocassette

A medium for the recording of analog audio and video tapes, now largely obsolete.

Diminishing Marginal Utility

The principle that the satisfaction or utility gained from consuming each additional unit of a good or service decreases as more of it is consumed over a certain period.