Suppose the central bank sells $100 of government securities to Guixin Bank, which is currently just meeting the required reserve ratio. Which of the following are correct? 1. The central bank obtains payment by reducing Guixin Bank's reserves by $100. 2. Guixin Bank now has insufficient reserves to meet the reserve requirement; to meet the reserve requirement, it can reduce its loans, destroying deposits in the process. 3. The money multiplier process is activated, and money is destroyed. 2 and 3 only. 1 and 3 only. 3 only. 1, 2 and 3 1 and 2 only.

Suppose the central bank sells $100 of government securities to Guixin Bank, which is currently just meeting the required reserve ratio. Which of the following are correct? 1. The central bank obtains payment by reducing Guixin Bank's reserves by $100. 2. Guixin Bank now has insufficient reserves to meet the reserve requirement; to meet the reserve requirement, it can reduce its loans, destroying deposits in the process. 3. The money multiplier process is activated, and money is destroyed. 2 and 3 only. 1 and 3 only. 3 only. 1, 2 and 3 1 and 2 only.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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