If the Federal Reserve Purchases $1,000 in Bonds and the Reserve

question 82

Multiple Choice

If the Federal Reserve purchases $1,000 in bonds and the reserve requirement ratio is 0.2,what will be the total change in reserves at all banks assuming there are no excess reserves?

• A) +$500
• B) +$5,000
• C) -$500
• D) -$5,000
• E) +$1,000

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Definitions:

Dividends

Payments made by a corporation to its shareholder members, distributing profits.

Revised Model Business Corporation Act

An influential model law that suggests legal standards and practices for the formation, operation, and dissolution of corporations in the United States.

Book Value

The net value of a company's assets minus its liabilities and preferred stock, reported on the balance sheet.

Legal Asset Distributions

The process of dividing and distributing a company's assets to shareholders, creditors, or heirs following legal rules.