I need help with all the answers?

Posted on 2014-12-19 06:12:00 in Economics by RIYADH

1). When conducting an open-market purchase, the Fed

a. buys government bonds, and in so doing increases the money supply.
b. buys government bonds, and in so doing decreases the money supply.
c. sells government bonds, and in so doing increases the money supply.
d. sells government bonds, and in so doing decreases the money supply.

2). A bank’s reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

a. $5.
b. $50.
c. $95.
d. $950.

3). The money multiplier equals

a. 1/R, where R represents the quantity of reserves in the economy.
b. 1/R, where R represents the reserve ratio for all banks in the economy.
c. 1/(1+R), where R represents the quantity of reserves in the economy.
d. 1/(1+R), where R represents the reserve ratio for all banks in the economy.

4). Based on the quantity equation, if M = 3,000, P = 2, and Y = 4,500, then V =

a. 1.33.
b. 1.5.
c. 3.
d. 6.75.

5). Suppose the United States unexpectedly decided to pay off its debt by printing new money. Which of
the following would happen?

a. People who held money would feel poorer.

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