When the Fed Buys $100 Worth of Bonds from a Primary

question 191

Multiple Choice

When the Fed buys $100 worth of bonds from a primary dealer,reserves in the banking system

• A)increase by $100.
• B)increase by more than $100.
• C)decrease by $100.
• D)decrease by more than $100.

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Definitions:

Price System

A mechanism through which prices are determined for goods and services in an economy, guiding and coordinating economic actions by conveying information about relative market values and scarce resources.

Capital Source

The origins of the funds or assets that are invested in a business or project.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they can be used by multiple people without depleting the supply.

Provision

A specified amount set aside for future expenses or reductions in asset value, typically used in accounting and financial reporting.