Under which of the following situations will the purchase of bonds by the Central Bank have the greatest effect on real GDP of an economy? A. The required reserve ratio is high, and the interest rate has a large effect on investment spending. B. The required reserve ratio is high, and the interest rate has a small effect on investment spending. C. The required reserve ratio is low, and the interest rate has a large effect on investment spending. D. The required reserve ratio is low, and the marginal propensity to consume is low.
Under which of the following situations will the purchase of bonds by the Central Bank have the greatest effect on real GDP of an economy? A. The required reserve ratio is high, and the interest rate has a large effect on investment spending. B. The required reserve ratio is high, and the interest rate has a small effect on investment spending. C. The required reserve ratio is low, and the interest rate has a large effect on investment spending. D. The required reserve ratio is low, and the marginal propensity to consume is low.
Chapter25: Money Creation
Section: Chapter Questions
Problem 8SQP
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Under which of the following situations will the purchase of bonds by the Central Bank have the greatest effect on real
A. The
B. The required reserve ratio is high, and the interest rate has a small effect on investment spending.
C. The required reserve ratio is low, and the interest rate has a large effect on investment spending.
D. The required reserve ratio is low, and the marginal propensity to consume is low.
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