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 60 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
Thanks for the timely response, appreciate it

ttt030911

  • Member
  • Posts: 315
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

Everyone has one nostril that is larger than the other.

Did you know?

Walt Disney helped combat malaria by making an animated film in 1943 called The Winged Scourge. This short film starred the seven dwarfs and taught children that mosquitos transmit malaria, which is a very bad disease. It advocated the killing of mosquitos to stop the disease.

Did you know?

According to the CDC, approximately 31.7% of the U.S. population has high low-density lipoprotein (LDL) or "bad cholesterol" levels.

Did you know?

Human stomach acid is strong enough to dissolve small pieces of metal such as razor blades or staples.

Did you know?

Once thought to have neurofibromatosis, Joseph Merrick (also known as "the elephant man") is now, in retrospect, thought by clinical experts to have had Proteus syndrome. This endocrine disease causes continued and abnormal growth of the bones, muscles, skin, and so on and can become completely debilitating with severe deformities occurring anywhere on the body.

Open-top chambers, such as the one pictured above in a polar desert on Ellesmere Island, are commonl Open-top chambers, such as the one pictured above in a polar desert on Ellesmere Island, are commonl
Disulfide bonds are yellow; the three chains are colored Disulfide bonds are yellow; the three chains are colored
The Hepatic Portal Blood Supply The liver receives water, minerals, and nutrients from the digestive The Hepatic Portal Blood Supply The liver receives water, minerals, and nutrients from the digestive
Distribution of Thunderstorms: Approximately 14.5 million thunderstorms occur each year across the ... Distribution of Thunderstorms: Approximately 14.5 million thunderstorms occur each year across the ...
Main Hall, Trajan's Market Main Hall, Trajan's Market
What mass, in grams, of a 5.00% by mass sugar water solution is needed to supply What mass, in grams, of a 5.00% by mass sugar water solution is needed to supply
Video: Protein digestion - stomach & small intestine

For a complete list of videos, visit our video library