Which of the Following Statements Is True When the Fed

question 11

Multiple Choice

Which of the following statements is true when the Fed increases reserves by buying a government bond from a bank?

• A)The amount of reserves in the banking system will increase by an amount greater than the amount of the bond purchase.
• B)The amount of loans made by the banking system will increase by the amount of the bond purchase.
• C)The amount of loans made by that bank will be greater than the increase in reserves.
• D)The amount of deposits made by the banking system will increase by the amount of the bond purchase.
• E)The amount of reserves in the banking system will increase by the amount of the bond purchase.

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