Question : 41) When the Fed buys $100 million of securities from : 1240451

41) 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.

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) $8,000

E) $100,000

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.

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.

45) When the Fed purchases government securities ________ loans end up being made because ________.

A) more; excess reserves in the banking system increase

B) more; excess reserves in the banking system decrease

C) fewer; excess reserves in the banking system increase

D) fewer; excess reserves in the banking system decrease

E) fewer; required reserves in the banking system increase but desired reserves decrease

46) 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.

47) 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

48) 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

49) 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 amount.

D) liabilities of the Fed change in composition but not in amount.

E) liabilities of First Union decrease by $100,000.

50) 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