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If the multiplier is 2.5, the MPC is?

a. 0.2.
b. 0.6.
c. 0.75.
d. 1.00.

2) If the Fed conducts open-market purchases which of these there increases in the short run: interest rates, prices, and investment spending?


a. interest rates, prices, and investment spending
b. interest rates and prices, not investment spending
c. prices and investment spending, not interest rates
d. interest rates, not prices nor investment spending

3) Which of the following Fed actions would both increase the money supply?


a. buy bonds and raise the reserve requirement
b. buy bonds and lower the reserve requirement
c. sell bonds and raise the reserve requirement
d. sell bonds and lower the reserve requirement

1. b 2.5=1/1-.6
2. C
3.b

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