When a Bank Borrows Reserves from the Federal Reserve

question 10

Multiple Choice

When a bank borrows reserves from the Federal Reserve

• A) the monetary base remains unchanged because no new reserves are created.
• B) the Fed may choose to nullify the effect on the monetary base through an open market sale.
• C) the monetary base increased as new reserves enter the banking system.
• D) both b and c.
• E) none of the above.

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Definitions:

State Statute

Laws enacted by the legislative bodies of individual states that govern within the state's boundaries, differing from federal statutes which apply across the United States.

Filed

The act of submitting documents officially to a designated authority or office for the purpose of record-keeping and review.

Perfection Method

Legal procedures used to establish a secured party's rights in a collateral against third parties, especially in bankruptcy.

Deposit Account

A bank account that allows the holder to deposit and withdraw money, including savings accounts, checking accounts, and money market accounts.