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

question 27

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 reserves, of which it can lend $800.
• B) the bank has $1,000 in additional reserves, of which it can lend $900.
• 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:

Chemical Digestion

The breakdown of food into smaller molecules by enzymatic action, allowing for nutrient absorption.

Fats Digested

The process by which fats are broken down by enzymes and bile acids in the digestive system.

Chief Cells

Cells found in the stomach lining that secrete pepsinogen, a precursor to the digestive enzyme pepsin, crucial for protein digestion.

Gastric Glands

Glands located in the lining of the stomach that secrete gastric juice, including hydrochloric acid and digestive enzymes, aiding in digestion.