Question : 51) Suppose the Fed buys $1 million of government securities : 1240452

51) 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

52) The Fed sells $300 million U.S. government securities to commercial banks. This action leads to ________ in Fed assets and ________ in Fed liabilities.

A) a $300 million increase; a $300 million increase

B) a $300 million increase; a $300 million decrease

C) no change; no change

D) a $300 million decrease; a $300 million decrease in

E) a $300 million decrease; a $300 million increase

53) When the Fed sells government securities to banks, the sale

A) increases banks’ reserves.

B) increases the quantity of money.

C) creates more excess reserves.

D) decreases banks’ reserves.

E) increases the monetary base.

54) An open market purchase of securities by the Fed leads to all of the following EXCEPT

A) an initial increase in excess reserves.

B) an increase in bank lending.

C) a decrease in the quantity of money.

D) an increase in banks’ reserves.

E) an increase in the monetary base.

55) If the Fed sells government securities to a member of the nonbank public, then the resulting effect on the quantity of money is

A) much larger than if the securities were sold to a bank.

B) much smaller than if the securities were sold to a bank.

C) the same as if the securities were sold to a bank.

D) that there is no change in the quantity of money.

E) None of the above answers is correct.

56) Comparing the effect on the monetary base between an open market purchase of government securities from a bank and the same open market operation conducted with the general public, the monetary base

A) increases by a larger amount if the general public sells the securities than if a bank sells the securities.

B) increases by a larger amount if a bank sells the securities than if the general public sells the securities.

C) does not change if it is the general public that sells the securities.

D) increases by the same amount if the general public sells the securities or if a bank sells the securities.

E) decreases by the same amount if the general public sells the securities or if a bank sells the securities.

57) If the Fed buys government securities from the non-bank public, then

A) reserves at banks decrease.

B) loans at banks decrease.

C) deposits at banks increase and banks’ reserves decrease.

D) deposits at banks increase and banks’ reserves increase.

E) deposits at banks decrease and banks’ reserves increase.

58) The Fed purchases $1 million of U.S. government securities from First Bank. The desired reserve ratio is 10 percent, the currency drain ratio is zero, and banks loan all excess reserves. The Fed’s purchase increases First Bank’s excess reserves by how much?

A) $900,000

B) $1,000,000

C) $1,100,000

D) $10,000,000

E) $100,000

59) When the desired reserve ratio is 10 percent, suppose the Fed buys $1,000,000 of government securities from banks. As a result, the banks’ excess reserves

A) increase by $900,000.

B) increase by $1,000,000.

C) increase by $10,000.

D) decrease by $10,000.

E) decrease by $1,000,000.

60) The FUN Bank has no excess reserves when a new deposit of $20,000 is made. The desired reserve ratio is 5 percent. After the deposit, but before making any loans, how much does The FUN Bank have in excess reserves?

A) $1,000

B) $20,000

C) $9,000

D) $19,000

E) $21,000