Author Question: The Fed purchases 1 million of U.S. government securities from First Bank. The desired reserve ratio ... (Read 127 times)

Zulu123 · **on:** Jun 29, 2018

The Fed purchases 1 million of U.S. government securities from First Bank. The desired reserve ratio is 10 percent, the currency drain ratio is zero, and banks loan all excess reserves.

The Fed's purchase increases First Bank's excess reserves by how much? A) 900,000
B) 1,000,000
C) 1,100,000
D) 10,000,000
E) 100,000

Question 2

Monopolies arise when there are

A) many substitutes but there are no barriers to entry.
B) no close substitutes and there are no barriers to entry.
C) no close substitutes and there are barriers to entry.
D) many substitutes and there barriers to entry.
E) None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry.