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When the Fed Buys Securities from a Bank, What Happens

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Essay

When the Fed buys securities from a bank, what happens to the monetary base and the quantity of money? Which changes by more or do both change by the same amount?


Definitions:

Dividends

Profits distributed by a company to its shareholders, usually derived from the company's earnings.

Market Price

The present cost at which a service or asset is available for purchase or sale in the market.

Expected Dividend Rate

An estimate of the yearly dividend per share that a company plans to pay out to its shareholders.

Future Net Income

The projected earnings of a company after all expenses and taxes have been subtracted from revenue, indicating expected profitability.

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