Table 29-1 Effects of an Open-Market Transaction on the Balance

question 1

Multiple Choice

Table 29-1 Effects of an open-market transaction on the balance sheets of banks and the fed (in millions of dollars) After the transaction in Table 29-1 is completed, what happens to actual reserves, required reserves, and excess reserves? Assume the required reserve ratio is 25 percent.

• A) Actual reserves increase by $10 million, required reserves increase $2.5 million, and excess reserves increase by $7.5 million.
• B) Actual reserves decrease by $10 million, required reserves decrease $2.5 million, and excess reserves decrease by $7.5 million.
• C) Actual reserves increase by $10 million, required reserves are unchanged, and excess reserves increase by $10 million.
• D) Actual reserves decrease by $10 million, required reserves decrease by $10 million, and excess reserves are unchanged.

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Definitions:

Metamemory

Knowledge of the functions and processes involved in one’s storage and retrieval of information (memory), as shown by the use of cognitive strategies to retain information.

Immanent Justice

The view that a negative experience is a direct consequence of wrongdoing, reflecting the belief that morality is embedded within the structure of the universe.

Decentrations

The cognitive ability to consider multiple aspects of a situation rather than focusing only on a single point of view.

Concrete Operations

In developmental psychology, a phase where individuals gain the ability to understand logical operations in tangible situations and solve problems involving physical objects.