If the Fed Purchases Federal Government Bonds on the Open

question 17

Multiple Choice

If the Fed purchases federal government bonds on the open market, bank reserves will ____, leading to a(n) _______ in the money supply.

• A)decrease; decrease
• B)increase; decrease
• C)increase; increase
• D)decrease; increase

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Definitions:

Credit Portion

The part of a journal entry that records the increase in liabilities or equity or the decrease in assets.

Trial Balance

A financial report that lists the balances of all ledgers accounts on a specified date, used to verify that the total debits equal total credits in the accounting system.

Account Balance

The difference between the total debits and total credits in an account, representing the current amount in that account.

Debits

Entries that increase asset or expense accounts, or decrease equity, liability, or revenue accounts, typically noted on the left side of an accounting ledger.