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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Definitions:

Common Stock

Type of equity security that represents ownership in a corporation, with rights to vote on corporate matters and share in dividends.

Real Goods

Real goods refer to physical, tangible products and commodities that can be touched, used, and traded, in contrast to services or digital products.

Option Delta

The change in the stock price divided by the change in the call price.

Stock Price

The current price at which a share of a company's stock can be bought or sold in the market.