-Based on the Above Table, an Open Market Operation in Which

question 441

Multiple Choice

-Based on the above table, an open market operation in which the Fed purchased $100,000 of government securities would

• A)create a reserve deficiency for the banking system.
• B)lead to a maximum potential expansion of the money supply of $100,000.
• C)lead to a maximum potential expansion of the money supply of $1 million.
• D)cause demand deposits to fall by $100,000.

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Definitions:

Trading

The act of buying, selling, or exchanging financial assets like stocks, bonds, or commodities in financial markets.

Coupon Bond

A debt security that pays the holder a fixed interest rate (coupon) over a specified period until maturity, at which point the face value is repaid.

Current Yield

The annual income (interest or dividends) earned from an investment, expressed as a percentage of the current market price.

Trading

The act of buying and selling assets, such as stocks, bonds, commodities, or currencies, in financial markets to earn a profit.