Suppose the Fed Sells $1,000 of Government Securities to Commercial

question 173

Multiple Choice

Suppose the Fed sells $1,000 of government securities to Commercial Banks.Which pair of the T-accounts below shows this transaction?

• A)\[\begin{array} { | c c | l c l |}
• \hline { \text { Federal Reserve } } && { \text { Commercial Banks } } \\
• \hline \text { Assets } & \text { Liabilities } & \text { Assets } & { \text { Liabilities } } \\
• \text { Reserves }&-1,000 & \text { Reserves }&-1,000 \\
• \text { Securities }&-1,000 & \text { Securities }&+1,000 \\
• \hline
• \end{array}\]
• B)\[\begin{array} { | c c | l c c | }
• \hline{ \text { Federal Reserve } } &&{ \text { Commencial Banks } } \\
• \hline \text { Assets } & \text { Liabilities } & \text { Assets } & & \text { Liabilities } \\
• \hline \text { Securities } + 1,000 & \text { Commercial Banks' } & \text { Reserves } & - 1,000 & \text { Securities } + 1,000 \\
• & \text { Reserves } + 1,000 & & & \\
• \hline
• \end{array}\]
• C)\[\begin{array} { | c c | l c | }
• \hline { \text { Federal Reserve } } &&{ \text { Commercial Banks } } \\
• \hline \text { Assets } & \text { Liabilities } & \text { Assets } & \text { Liabilities } \\
• \hline \text { Securities } - 1,000 & \text { Commercial Banks' } & \text { Government } & \text { Checkable } \\
• & \text { Reserves } - 1,000 & \text { Securities } + 1,000 & \text { Deposits } + 1,000 \\
• \hline
• \end{array}\]
• D)\[\begin{array} { | c c | l c c | }
• \hline { \text { Federal Reserve } } &&{ \text { Commercial Banks } } \\
• \hline \text { Assets } & \text { Liabilities } & \text { Assets } & \text { Liabilities } \\
• \hline \text { Securities } - 1,000 & \text { Commercial Banks' } & \text { Reserves } & - 1,000 & \\
• &\text { Reserves } - 1,000 & \text { Securities } &+ 1,000 \\
• \hline
• \end{array}\]

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Definitions:

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two quantitative variables.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases, and vice versa, indicating an inverse relationship.

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount borrowed, paid by the borrower to the lender for the use of funds.

House Sales

The process of buying or selling residential properties.