When the Fed Purchases Securities from a Bank,it __________ Reserves

question 106

Multiple Choice

When the Fed purchases securities from a bank,it __________ reserves and ____________ the money supply.

• A) decreases; decreases
• B) increases; increases
• C) decreases; increases
• D) increases; decreases
• E) has no impact on; has no impact on

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Definitions:

Securities

Financial instruments that represent obligations on the part of the issuers to provide the purchasers with expected stated returns on the funds invested or loaned.

Financial Instruments

Contracts and securities that represent a financial value or obligation, such as stocks, bonds, options, and futures.

Bondholders

Investors who own bonds issued by corporations or governments, entitled to receive interest payments and the principal amount upon maturity.

Creditors

Individuals or institutions that lend money or extend credit to others, expecting repayment in the future with possible interest.