Other Things Being Equal, When the Fed Buys U

question 347

Multiple Choice

Other things being equal, when the Fed buys U.S. government securities

• A) the U.S. Treasury must immediately issue new securities to replace the securities that the Fed has removed from the market.
• B) the Fed's total assets and total liabilities immediately expand by exactly the amount of the Fed's purchase.
• C) the quantity of deposits in the U.S. banking system expands by less than the amount of the Fed's purchase.
• D) the quantity of paper currency and coins in circulation expands by more than the amount of the Fed's purchase.

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