Question

Circle the best answer 1. The purchase of Treasury securities by the Federal Reserve will, in general, A) not change the money supply. B) not change the quantity of reserves held by banks. C) decrease the quantity of reserves held by banks. D) increase the quantity of reserves held by banks. Suppose, r0.10,0 $400 Billion, D-5800 Billion, EX.R- $0.8 billion MI-CD-$1200 Billion 2. Refere to above information, the mm (mony multiplier) is A) 1.5 B) 2.5 C) 2 D) 4 E) None of the above deposit ratio is 0.2. What is deposit ratio is 0.3 and the reserve 3. Assume that the currency the money multiplier? A) 1.5 B) 2.0 C) 2.6 D) 5.0 4. The quantity theory of money predicts that, in the long run, inflation results from the A) money supply growing at a slower rate than real GDP. B) money supply growing at a faster rate than real GDP. C) velocity of money growing at a slower rate than real GDP. D) velocity of money growing at a faster rate than real GDP. 5. If the money supply grows at 5% and real GDP grows at 6%, the quantity theory predicts the inflation rate will be A) -1%. B) 1%. C) 1.2%. D) 11%.

Answer 1

The fed buying the treasuries security in the market will decrease the money supply as they will take the money and hand out the securities in the market. The answer is "decrease the money supply"