In the above figure, CBL is the cost of breaking the law. If it ...

[jparksx]

In the above figure, CBL is the cost of breaking the law. If it is illegal to buy and sell, then the quantity of the good bought and sold will be
 
  A) 100.
  B) 200.
  C) 300.
  D) 400.

Question 2

When the Fed buys securities from a bank, what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?
 
  What will be an ideal response?

[reversalruiz]

Answer to Question 1

A

Answer to Question 2

When the Fed buys securities from a bank, both the monetary base and the quantity of money increase. As reflected by the money multiplier, the increase in the quantity of money exceeds the increase in the monetary base.