When the Fed sells government securities to banks, the sale
A) decreases banks' reserves.
B) increases the quantity of money.
C) creates more excess reserves.
D) increases banks' reserves.
E) increases the monetary base.
Question 2
According to the theory of purchasing power parity, the exchange rate between two countries reflects
A) the interest rates in the two countries.
B) the unemployment rates in the two countries.
C) government spending in the two countries.
D) differences in the overall price levels in the two countries.
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