A purchase of U.S. government securities by the Fed causes A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. B. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. C. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system. D. a multiple expansion of the money supply because the required reserve ratio is less than one
A purchase of U.S. government securities by the Fed causes A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. B. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. C. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system. D. a multiple expansion of the money supply because the required reserve ratio is less than one
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A purchase of U.S. government securities by the Fed causes
a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased.
a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system.
an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system.
a multiple expansion of the money supply because the required reserve ratio is less than one
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