This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Suppose the Fed purchases 1 million in bonds in the open market. Explain how the money supply can ... (Read 90 times)

Chelseaamend

  • Hero Member
  • *****
  • Posts: 545
on: Jun 30, 2018
Suppose the Fed purchases 1 million in bonds in the open market. Explain how the money supply can increase by more than 1 million.
 
  What will be an ideal response?

Question 2

A movement along the consumption function shows the change in consumption expenditure as a result of a change in
 
  A) disposable income.
  B) the interest rate.
  C) net taxes.
  D) the price level.
  E) saving.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

aham8f

  • Sr. Member
  • ****
  • Posts: 336
Reply #1 on: Jun 30, 2018
Answer to Question 1

Transaction deposits and reserves increase by 1 million as a result of the purchase. Since the reserve ratio is less than one, the bank now can loan some of the reserves to someone. If it does, then the transaction deposits of the borrower increase by the amount of the loan, so the money supply has increased further.

Answer to Question 2

A


Chelseaamend

  • Member
  • Posts: 545
Reply 2 on: Jun 30, 2018
Excellent

laurnthompson

  • Member
  • Posts: 334
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

The National Institutes of Health have supported research into acupuncture. This has shown that acupuncture significantly reduced pain associated with osteoarthritis of the knee, when used as a complement to conventional therapies.

Did you know?

Although the Roman numeral for the number 4 has always been taught to have been "IV," according to historians, the ancient Romans probably used "IIII" most of the time. This is partially backed up by the fact that early grandfather clocks displayed IIII for the number 4 instead of IV. Early clockmakers apparently thought that the IIII balanced out the VIII (used for the number 8) on the clock face and that it just looked better.

Did you know?

When blood is exposed to air, it clots. Heparin allows the blood to come in direct contact with air without clotting.

Did you know?

Eating carrots will improve your eyesight. Carrots are high in vitamin A (retinol), which is essential for good vision. It can also be found in milk, cheese, egg yolks, and liver.

Did you know?

One way to reduce acid reflux is to lose two or three pounds. Most people lose weight in the belly area first when they increase exercise, meaning that heartburn can be reduced quickly by this method.

The open ocean is the most extensive biome on earth. The open ocean is the most extensive biome on earth.
The jaguar can range across a variety of forested and open habitat, but is strongly associated with The jaguar can range across a variety of forested and open habitat, but is strongly associated with
OPEN GLOVING 1 OPEN GLOVING 1
Ripped Money Ripped Money
Valves in veins open to permit blood flow, close to prevent backflow. Valves in veins open to permit blood flow, close to prevent backflow.
A thermostat stuck in the open position caused the engine to operate too cold. The vehicle failed ... A thermostat stuck in the open position caused the engine to operate too cold. The vehicle failed ...
Video: Chemical Changes

For a complete list of videos, visit our video library