Christopher Buys a US Treasury Security from the Federal Reserve

question 19

Multiple Choice

Christopher buys a US Treasury security from the Federal Reserve in the secondary market. He pays cash. What is the result of this transaction?

• A)The monetary base will increase, and the Federal Reserve will have a new asset.
• B)Both the monetary base and bank reserves will increase.
• C)The monetary base will decrease, and bank reserves will stay the same.
• D)Both the monetary base and bank reserves will decrease.

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Definitions:

Technologies

Encompasses the collection of techniques, skills, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation.

Comparative Advantage

The ability of an individual, company, or nation to produce a good or service at a lower opportunity cost than its competitors.

High-Opportunity Cost

Refers to the high value or benefit that is foregone from not choosing the next best alternative with available resources.

Low-Opportunity Cost

Describes a situation where choosing one option over another entails a minimal sacrifice of alternative opportunities or benefits.