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The Effect of an Open Market Purchase on Reserves Differs

question 62

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The effect of an open market purchase on reserves differs depending on how the seller of the bonds keeps the proceeds.If the proceeds are kept in ________,the open market purchase has no effect on reserves; if the proceeds are kept as ________,reserves increase by the amount of the open market purchase.


Definitions:

International Specialization

The economic strategy where countries focus on the production and export of goods and services for which they have a comparative advantage.

Trading Possibilities Line

A line that shows the different combinations of two products that an economy is able to obtain (consume) when it specializes in the production of one product and trades (exports) it to obtain the other product.

Cost Ratios

These ratios compare different types of costs to each other or to sales in order to evaluate a company's financial efficiency and profitability.

Constant Costs

Costs that do not change in total with the level of activity or production volume, within a certain range of activity or period of time.

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