What Restricts the Fed's Ability to Write Checks and Purchase

question 96

Multiple Choice

What restricts the Fed's ability to write checks and purchase U.S. securities?

• A) Congress; the Fed must receive a budget allocation from Congress before it can write a check.
• B) The gold requirement; the Fed cannot write a check unless it has a sufficient amount of gold to back the expenditure.
• C) Reserve requirements; the Fed must maintain 20 percent of its assets in the form of cash against the deposits that it is holding for commercial banks.
• D) Nothing; the Fed can create money simply by writing a check on itself.

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Definitions:

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