If the Fed Buys a U

question 21

Multiple Choice

If the Fed buys a U.S. government bond from a member of the public,

• A)​the banking system has more reserves and the money supply tends to grow.
• B)​the banking system has less reserves and the money supply tends to grow.
• C)​the banking system has more reserves and the money supply tends to fall.
• D)​the banking system has less reserves and the money supply tends to fall.

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Definitions:

Expense Payable

Obligations or liabilities to pay for goods or services received but not yet paid for.

Accounting Equation

The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Owner's Equity, representing a company's financial position.

Assets

Resources owned by a business or individual that are expected to provide future economic benefits.

Liabilities

Liabilities are financial obligations or debts that an entity owes to external parties, expected to be settled over time through the transfer of economic benefits.