If the Fed Carries Out an Open Market Operation to Buy

question 152

Multiple Choice

If the Fed carries out an open market operation to buy U.S. government securities, the federal funds rate ________ and the quantity of reserves ________.

• A) falls; increases
• B) rises; increases
• C) falls; decreases
• D) rises; decreases

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Definitions:

Revaluation Model

An accounting method that allows for the upward adjustment in the carrying amount of a fixed asset to reflect its current market value.

Exchange Rate

The price at which one currency can be exchanged for another currency in the foreign exchange market.

Balance Sheet

A financial statement that summarizes an organization's assets, liabilities, and shareholders' equity at a specific point in time.