An Open Market Purchase of Securities by the Fed Leads

question 28

Multiple Choice

An open market purchase of securities by the Fed leads to all of the following EXCEPT

• A)an initial increase in excess reserves.
• B)an increase in bank lending.
• C)a decrease in the quantity of money.
• D)an increase in banks' reserves.
• E)an increase in the monetary base.

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Definitions:

Present Value

The contemporary valuation of a future lump sum or cash flow sequence, based on a chosen rate of earnings.

Nonrenewable Resource

A natural resource that cannot be replaced once it is consumed, such as oil, natural gas, and coal.

Gold Ore

A mineral or rock from which gold can be profitably extracted, typically characterized by the presence of gold particles or veins within the rock.

Forests

Large areas covered predominantly with trees and underbrush, playing a critical role in biodiversity and the environment.