If the Fed purchases government securities from a commercial bank, which of the following will happen?
A) The Fed will increase the bank's reserves on deposit at the Fed.
B) The Fed will decrease the bank's reserves on deposit at the Fed.
C) The assets (government securities) of the Fed will decrease.
D) The assets (government securities) of the Fed will increase.
E) a and d
E
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Which of the following statements is (are) correct? The Federal Reserve
a. can, over the long run, roughly control the money supply by changing the monetary base to offset any undesirable changes in the money stock as a result of changes in currency holdings or excess reserve holdings. b. controls the money supply better in the long-run because of short-run uncertainty regarding the money multiplier. c. is in absolute control of the money stock at all times. d. Both a and b
Fiscal policy formation causes a delay in implementation even though a recession can usually be recognized within a few weeks after it begins.
Answer the following statement true (T) or false (F)
Why do banks package loans into securities?
A. To take advantage of tax breaks passed by the federal government as part of stimulus packages. B. The banking regulations require them to do so. C. To spread the risk of default and increase liquidity. D. To get around adhering to current banking regulations.
Does the money demand curve have a positive slope or a negative slope? Why does it have this slope? Explain why an increase in the variable on the vertical axis of the money demand curve causes either an increase or a decrease in the variable on the
horizontal axis of the money demand curve. What will be an ideal response?