When the Fed Sells Government Securities

question 171

Multiple Choice

When the Fed sells government securities

• A) reserves increase, leading to a decrease in the money supply by an amount more than the sale of the government securities.
• B) reserves decrease, leading to a increase in the money supply by an amount more than the sale of the government securities.
• C) reserves increase, leading to a increase in the money supply by an amount more than the sale of the government securities.
• D) reserves decrease, leading to a decrease in the money supply by an amount more than the sale of the government securities.

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Definitions:

Functional Currency

Functional currency is the currency of the primary economic environment in which an entity operates, and in which its financial statements are prepared.

Functional Currency

The main currency used by a business or unit in its day-to-day operations.

Exchange Rate

The price at which one currency can be exchanged for another, often fluctuating based on market conditions.