If a Bank Sells a $1,000 Security to the Fed

question 18

Multiple Choice

If a bank sells a $1,000 security to the Fed and the required reserve ratio is 20 percent:

• A)the bank has $1,000 in additional excess reserves,of which it can lend $800.
• B)the bank has $1,000 in additional excess reserves,all of which it can lend out.
• C)the bank has lost an asset and must reduce its loans.
• D)the bank has lost a liability.
• E)there is no change in excess reserves,since net assets do not change.

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Definitions:

Appeal To Pity

A fallacy in which someone tries to win support for an argument or idea by exploiting his or her opponent's feelings of pity or guilt.

Fair-Mindedness

The trait of being open to different ideas and opinions, and willing to consider the evidence for them fairly.

Professional Persona

The public image or identity that an individual presents in a professional context.

Modesty

The quality of being humble and not boasting about one's abilities or achievements; in presentation, it may refer to understating or not overly exaggerating one's case.