The Fed sells a U.S. government security and a bank dealer writes a check for the amount. When the check clears

A. reserves increase by the amount of the check because the Fed clears the check by increasing the amount of the bank's deposits with the Fed.
B. reserves remain unchanged because the decrease of reserves at the dealer's bank is offset by an increase in the reserves at the Fed.
C. reserves have fallen by the amount of the reserves times the reserve ratio, and the money supply falls by the difference between the amount of the check and the fall in the reserves.
D. reserves have fallen by the amount of the check because the Fed clears the check by reducing the bank's deposits at the Fed.


Answer: D

Economics

You might also like to view...

A price support set above the equilibrium price does which of the following?

i. decreases producer surplus ii. decreases consumer surplus iii. decreases the marginal cost of the last unit produced A) i and ii B) i and iii C) ii and iii D) i, ii, and iii E) ii only

Economics

In 2010, about

A) 20 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. B) 10 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. C) 30 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. D) 40 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars. E) 85 percent of foreign exchange transactions involved exchanges of foreign currencies for U.S. dollars.

Economics

Suppose the Swiss franc rises against the British pound but falls against the Japanese yen. What happens to the prices of goods imported into Switzerland?

A) Both British and Japanese goods fall in price. B) Both British and Japanese goods rise in price. C) British goods rise in price while Japanese goods fall in price. D) British goods fall in price while Japanese goods rise in price.

Economics

What are federally chartered banks called?

A) federal banks B) Federal Reserve banks C) national banks D) central banks

Economics