The Federal Reserve may increase the money supply by:
a. selling a bond to a member bank.
b. selling a bond to a securities dealer.
c. lending reserves to banks.
d. increasing required reserve ratios.
e. increasing the discount rate.
Question 2
Which of the following is true of the simple spending multiplier
a. It equals the ratio of the marginal propensity to consume to the marginal propensity to save.
b. It equals the difference between the marginal propensity to save and the marginal propensity to consume.
c. It is the reciprocal of the marginal propensity to save.
d. It is the reciprocal of the marginal propensity to consume.
e. It is the sum of the marginal propensity to consume and the marginal propensity to save.
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