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Answer on Macroeconomics Question for rion

Question #30542
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

E) The money supply will be unchanged


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!
Expert's answer
1.E) The money supply will be unchanged
Because Fed doesn't create new money by selling bonds, so the supply will not
increase or decrease.

2.D) Impossible to determine with provided information because we need such additional info, as price level (or inflation).

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