Suppose That the Fed Undertakes an Open Market Purchase of $1

question 153

Multiple Choice

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank.If the required reserve ratio is 9%,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)$11.11 million
• B)$9 million
• C)$1.09 million
• D)$90 million

---

Definitions:

Identical Situations

Circumstances or scenarios where all relevant factors and conditions are exactly the same for all parties involved.

Different Contexts

The varying situations, circumstances, or environments in which a concept or term can be applied or understood.

Starting Position

The initial condition or status from which a process, negotiation, or competition begins.

Framing Effects

The influence on decision-making and judgments caused by the way information is presented, rather than just the information itself.