When the Fed Sells Securities, the Total Funds of Commercial

question 34

Multiple Choice

When the Fed sells securities, the total funds of commercial banks ____ by the market value of the securities sold by the Fed. This activity initiated by the FOMC's policy directive is referredto as a ____ of money supply growth.

• A) increase; loosening
• B) decrease; loosening
• C) increase; tightening
• D) decrease; tightening
• E) none of the above

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Definitions:

Interest Payable

A liability account shown on a company’s balance sheet which represents the amount of interest expense that has accrued but has not been paid as of the balance sheet date.

Interest Expense

The financial cost of borrowing money that an entity sustains over time.

Notes Payable

Written promises to pay a specified amount of money, usually including interest, at a future date; classified as liabilities.

Cash

Money in the form of coins or banknotes, especially that which is used to conduct transactions.