Answer the Question on the Basis of the Following Consolidated

question 31

Multiple Choice

Answer the question on the basis of the following consolidated balance sheet of the commercial banking system.Assume that the reserve requirement is 10 percent.All figures are in billions and each question should be answered independently of changes specified in any preceding ones. $\begin{array}{c}\begin{array}{lll}\quad\quad\quad\underline{\text { Assets}}\\\text { Reserves}\\\text { Securities}\\\text { Loans}\\\text { Property} \end{array}\begin{array}{l}\\\$ 60 \\140 \\260 \\400 \end{array}\begin{array}{lll}\quad\quad \underline{\text { Liabilities \& Net Worth }}\\\text { Checkable Deposits}\\\text { Stock Shares}\\\\\\\end{array}\begin{array}{lll}\\\$600\\260\\\\\\\end{array}\end{array}$

Refer to the given data.Suppose the Fed wants to increase the money supply by $400 billion to drive down interest rates and stimulate the economy.Assuming that the money multiplier is operating to full effect,to accomplish the desired increase,the Fed could:

• A) sell $20 billion of U.S.securities to the banks.
• B) buy $20 billion of U.S.securities from the banks.
• C) sell $40 billion of U.S.securities to the banks.
• D) buy $40 billion of U.S.securities from the banks.

---

Definitions:

Return on Investment

A measure of the profitability of an investment, calculated as the ratio of net profit to initial cost.

Investment Turnover

A ratio that measures how effectively a company uses its invested capital to generate sales revenue.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated as a percentage of the investment's profit to its cost.

Support Department Cost

Support department cost refers to the expenses associated with departments that provide essential services or support to production departments but do not directly engage in the production process.