Suppose the Fed sells 10 million in government securities to a commercial bank. If the required reserve ratio is 0.2, what is the maximum amount by which checkable deposits in the banking system can change?
a. +10,000,000
b. 10,000,000
c. +50,000,000
d. 50,000,000
e. +20,000,000
Question 2
Assume an economy is in equilibrium at a real GDP of 5 trillion. If aggregate expenditure (AE) increases by 1 trillion, the economy's equilibrium real GDP is likely to _____.
a. increase by 1 trillion
b. increase by more than 1 trillion
c. increase by less than 1 trillion
d. decrease by 1 trillion
e. decrease by more than 1 trillion
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