Suppose the Fed buys 1 million of government securities from Bank One, a large commercial bank. Bank One's reserves ________ and its deposits ________.
A) increase by 1 million; do not change
B) increase by 1 million; increase by 1 million
C) do not change; increase by 1 million
D) do not change; do not change
E) decrease by 1 million; do not change
Question 2
The demand for chocolate is perfectly inelastic in Foodieland. If a tax is imposed on chocolate, ________.
A) the deadweight loss due to taxation will be high
B) the deadweight loss due to taxation will be one
C) consumers will stop consuming chocolate
D) the tax burden will fall entirely on buyers
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