When the Federal Open Market Committee Buys Government Securities

question 107

Multiple Choice

When the Federal Open Market Committee buys government securities:

• A) the reserve requirement of banks decrease.
• B) the reserve deposits of banks decrease.
• C) the excess reserves of banks increase.
• D) the federal funds rate increases.
• E) the legal reserves of banks decrease.

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Definitions:

Hypothesis

A testable prediction about the conditions under which a particular behavior or mental process may occur.

Negative Correlation

An association between two variables characterized by the increase of one variable leading to the decrease of the other, and the opposite is also true.

Inverse Relationship

An inverse relationship is a correlation between two variables where one variable increases as the other decreases, and vice versa.

Expectation of Drinking

The anticipation or belief about the effects that alcohol will have, which can influence an individual's drinking behavior and experience.