Home / Questions / When the Fed buys $100 million of securities from a commercial bank the A) monetary base
When the Fed buys $100 million of securities from a commercial bank the
A) monetary base increases.
B) money supply decreases.
C) bank's reserves decrease.
D) required reserve ratio decreases.
E) bank is risking its depositors' money.
Answer: A
Topic: Open market operation and the monetary base
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: RS
42) If the reserve requirement is 20 percent and the Fed buys $10,000 worth of Treasury bonds, what is the change in the banks' total reserves?
A) $2,000
B) $10,000
C) $20,000
D) $50,000
E) 100,000
Answer: B
Topic: Open market operation and the monetary base
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: New
43) When the Fed sells $100 million of securities to a commercial bank the
A) monetary base increases.
B) money supply increases.
C) bank's reserves decrease.
D) required reserve ratio decreases.
E) bank's reserves do not change.
Answer: C
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: RS
44) When the Fed purchases government securities,
A) excess reserves in the banking system increase, leading to more loans being made.
B) required reserves in the banking system increase, leading to more loans being made.
C) excess reserves in the banking system decrease, leading to fewer loans being made.
D) required reserves in the banking system decrease, leading to fewer loans being made.
E) the monetary base does not change.
Answer: A
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: CT
45) To increase the quantity of money in the economy, the Federal Reserve can
A) print more money and give it to the banks.
B) increase the required reserve ratio.
C) buy government bonds in an open market operation.
D) sell government bonds in an open market operation.
E) cut taxes.
Answer: C
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: NAU
46) When the Fed ________ securities in an open market operation, banks' reserves ________, and therefore lending ________.
A) sells; increase; increases
B) buys; increase; increases
C) sells; decrease; increases
D) buys; decrease; decreases
E) buys; do not change; does not change
Answer: B
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: DMC
47) The Fed buys $100 million U.S. government securities from Bank of America. Bank of America's balance sheet shows this transaction as ________ in total assets and ________ in reserves.
A) no change; a $100 million decrease
B) no change; a $100 million increase
C) a $100 million increase; no change
D) a $100 million increase; a $100 million increase
E) a $100 million decrease; a $100 million decrease
Answer: B
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: MR
48) If the Fed purchases securities in the amount of $100,000 from First Union Bank, then the
A) assets of First Union Bank decrease by $100,000.
B) assets of the Fed decrease by $100,000.
C) assets of First Union Bank change in composition but not in the amount.
D) liabilities of the Fed change in composition but not in amount.
E) liabilities of First Union decrease by $100,000.
Answer: C
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: WM
49) The Fed purchases $100 million of U.S. government securities from First National Bank. The balance sheet for First National Bank shows ________ in its total assets and ________ in its total liabilities.
A) a $100 million increase; a $100 million increase
B) a $100 million decrease; a $100 million increase
C) a $100 million increase; a $100 million decrease
D) no change; no change
E) a $100 million increase; no change
Answer: D
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: CT
50) Suppose the Fed buys $1 million of government securities from Bank One, a large commercial bank. Bank One's reserves ________ and its deposits ________.
A) increase by $1 million; do not change
B) increase by $1 million; increase by $1 million
C) do not change; increase by $1 million
D) do not change; do not change
E) decrease by $1 million; do not change
Answer: A
Topic: Open market operation
Skill: Level 2: Using definitions
Section: Checkpoint 11.4
Status: AA
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