Consider the following developments which happened at the same time: Households reduced their currency holding in favor of bank deposits by $1 million and the Fed purchased a $1 million Treasury Bill from the U.S. Government. What is the immediate or initial effect of these two actions on the money supply (M2)? A) M2 will increase by $1 million B) M2 will remain the same C) M2 will decrease by $1 million D) M2 will increase by $2 million
Consider the following developments which happened at the same time: Households reduced their currency holding in favor of bank deposits by $1 million and the Fed purchased a $1 million Treasury Bill from the U.S. Government. What is the immediate or initial effect of these two actions on the money supply (M2)? A) M2 will increase by $1 million B) M2 will remain the same C) M2 will decrease by $1 million D) M2 will increase by $2 million
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Money And The Banking System
Section: Chapter Questions
Problem 8CQ
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why is the answer a here? Which action doesn't factor into the money supply?
1.13. Consider the following developments which happened at the same time: Households reduced their currency holding in favor of bank deposits by $1 million and the Fed purchased a $1 million Treasury Bill from the U.S. Government. What is the immediate or initial effect of these two actions on the money supply (M2)?
A) M2 will increase by $1 million
B) M2 will remain the same
C) M2 will decrease by $1 million
D) M2 will increase by $2 million
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