An Open Market Purchase of Securities by the Central Bank

question 98

Multiple Choice

An open market purchase of securities by the central bank from banks usually will:

• A) increase the banks' revenue even if the bank does nothing with the reserves.
• B) induce the banks to make more loans since their revenue will decrease if they do nothing.
• C) decrease the amount of deposits in the banking system.
• D) decrease the banks' willingness and ability to make loans.

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Definitions:

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