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Required Reserve Ratio and MPC questions watch

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    RRR is 5%. Loans are deposited in checking accounts. If the Fed sells $1000 of US bonds to a commercial bank. What can we expect to happen?


    The money supply will FALL:
    A) by $20,000
    B) by $1,000


    Money supply will INCREASE:
    C) by $20,000
    D) by $1,000


    OR:
    E) The money supply will be unchanged

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    An economy in which MPC is .95 and RRR is 10%. If imports increase by 15, what is he change in real GDP?


    A) -300
    B) -150
    C) 300
    D) Impossible to determine with provided information

    --------------------------------------------------------------------

    So, I think the answer to #1 is E, and #2 is D.

    If I could get any help it would be much appreciated, just trying to understand all of this. Thank you very much for your time!
 
 
 
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Updated: May 15, 2013
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