An Open Market Sale of Securities by the Fed

question 557

Multiple Choice

An open market sale of securities by the Fed

• A) increases banksʹ reserves and decreases banksʹ securities.
• B) decreases banksʹ reserves and increases banksʹ securities.
• C) involves a bank selling government securities to the Fed.
• D) increases banksʹ total assets.

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Definitions:

Third Variable Problem

The possibility that two variables may be correlated but do not exert a causal influence on one another; rather, both are caused by some additional variable.

Mutual Association

A relationship between two or more entities where both or all parties benefit or influence each other.

Correlation

A statistical measure that indicates the extent to which two or more variables fluctuate together. A positive correlation indicates that as one variable increases, so does the other.

Correlational Hypothesis

A prediction about the existence of a relationship between two variables, without implying causation.