If Commercial Banks Have No Excess Reserves and the Fed

question 47

Multiple Choice

If commercial banks have no excess reserves and the Fed sells government securities

• A) the money supply will expand and interest rates will fall.
• B) total demand deposits in the banking system will fall by some multiple of the bond sale.
• C) the size of the money supply will not change but its composition will.
• D) the required reserve ratio will increase.
• E) banks will gain excess reserves equal to the amount of bonds sold.

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Definitions:

Astigmatism

A condition in which the cornea has an abnormal shape, which causes blurred images during near or distant vision.

Strabismus

A condition that results in a lack of parallel visual axes of the eyes; commonly called crossed eyes.

Presbyopia

A condition associated with aging in which the eye exhibits a progressively diminished ability to focus on near objects.

Myopia

A condition that occurs when light entering the eye is focused in front of the retina; commonly called nearsightedness.