Which of the Following Best Describes What Occurs When Monetary

question 233

Multiple Choice

Which of the following best describes what occurs when monetary authorities sell government securities?

• A)There is a decrease in the size of chartered banks' excess reserves, the money supply increases, and interest rates fall, thereby causing a decrease in investment spending and real GDP.
• B)There is a decrease in the size of chartered banks' excess reserves, the money supply decreases, and the interest rates rise, thereby causing a decrease in investment spending and real GDP.
• C)There is a decrease in the size of chartered banks' excess reserves, the money supply decreases, and interest rates rise, thereby causing an increase in investment spending and real GDP.
• D)There is an increase in the size of chartered bank reserves, the money supply increases, and interest rates fall, thereby causing an increase in investment spending and real GDP.

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Definitions:

Book Value

The net value of a company’s assets as recorded on the balance sheet, calculated as total assets minus liabilities and intangible assets.

Opportunity Cost

The potential benefit that is given up when one alternative is selected over another.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as materials and labor.

Eliminate

To completely remove or get rid of something.