If the Fed Purchases Government Securities on the Open Market,the

question 121

Multiple Choice

If the Fed purchases government securities on the open market,the money supply will

• A)decrease
• B)increase only if the seller of those securities is a commercial bank
• C)increase only if the seller of those securities is a commercial bank belonging to the Fed
• D)increase through the system of securities dealers rather than through the commercial banking system
• E)increase through the commercial banking system regardless of who the seller is

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Definitions:

C Rating

A rating given to a security indicating significant risk; it's one of the lower ratings in the grading scale of investments.

Catastrophe Bonds

Insurance-linked securities issued by insurance companies to transfer major risks from the issuer to investors, typically used for natural disaster risks.

Asset-Backed Bonds

Bonds that are secured by a pool of assets, such as loans or receivables, which generate the cash flow to pay bondholders.

TIPS

Treasury Inflation-Protected Securities, a type of U.S. Treasury bond designed to help investors protect against inflation.