When the Fed Purchases Government Securities from a Commercial Bank

question 109

Multiple Choice

When the Fed purchases government securities from a commercial bank, the bank:

• A)​automatically becomes poorer.
• B)​loses equity in the Fed.
• C)​receives reserves that can be used to make additional loans.
• D)​loses its ability to make loans.

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Definitions:

Debit Balances

The situation where the total debits in an account exceed the total credits, indicating assets or expenses.

Credit Balances

Balances in financial accounts indicating the amount owed by the account holder, often seen in liability and equity accounts.

Salaries Expense

The total amount paid to employees for services rendered during a specific period, recognized in the accounting period in which the employees performed the services.

Posting Reference

An identifier or code that links journal entries to the relevant accounts in the general ledger, facilitating tracking and auditing.