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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Definitions:

Non-breaching Buyers

Buyers who have fulfilled their contractual obligations and have not violated the terms of the contract.

UCC

The Uniform Commercial Code is an all-encompassing set of legal directives that oversee commercial trades in the United States.

Insolvent

A financial state in which an individual or entity is unable to meet their debt obligations as they become due because their liabilities exceed their assets.

In Transit

Denotes goods or items that are in the process of being transported from one location to another.