If the Fed Sells Government Securities to the General Public

question 267

Multiple Choice

If the Fed sells government securities to the general public in the open market,

• A)the Fed gives the securities to the public; the public pays for the securities by writing checks that, when cleared, will increase commercial bank reserves at the Fed.
• B)the Fed gives the securities to the public; the public pays for the securities by writing checks that, when cleared, will decrease commercial bank reserves at the Fed.
• C)the public gives the securities to the Fed in exchange for a Fed check, which, when deposited at commercial banks, will increase their reserves at the Fed.
• D)the public gives the securities to the Fed in exchange for a Fed check, which, when deposited at commercial banks, will decrease their reserves at

---

Definitions:

Competitive Equilibrium

A market state where supply equals demand, and no economic actors have the incentive to change their behavior.

Demand Equals Supply

A market equilibrium condition where the quantity of a good or service demanded by consumers equals the quantity supplied by producers.

Numeraire

A unit of account or standard measure in economics used to compare the value of goods or services.

Pareto Optimal

Another term for Pareto Efficient; describes a situation where no one's condition can be improved without worsening someone else's condition.