If a Bank Sells a $1,000 Security to the Fed

question 18

Multiple Choice

If a bank sells a $1,000 security to the Fed and the required reserve ratio is 20 percent:

• A)the bank has $1,000 in additional excess reserves,of which it can lend $800.
• B)the bank has $1,000 in additional excess reserves,all of which it can lend out.
• C)the bank has lost an asset and must reduce its loans.
• D)the bank has lost a liability.
• E)there is no change in excess reserves,since net assets do not change.

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Definitions:

Two-factor Theory

A psychological theory suggesting that emotional experiences arise from a combination of a physiological response and a cognitive interpretation of that response.

Physiological Arousal

The body's physical response to stimuli, involving increased heart rate, respiration, and energy mobilization.

Cannon-Bard

A theory of emotion that proposes that physiological arousal and emotional experience occur simultaneously and independently.

James-Lange

a theory of emotion proposing that emotions result from our interpretations of bodily reactions to stimuli.