Scenario 13.1 Assume the Following Conditions Hold

question 99

Multiple Choice

Scenario 13.1 Assume the following conditions hold.
Now the Federal Reserve engages in an open market operation by purchasing $1 billion worth of government bonds from private bond dealers, who then deposit the $1 billion in the banks.This acts to lower the equilibrium interest rate by 2 percent. Refer to Scenario 13.1.What is the change in excess reserves following the open market operation by the Fed?

• A)-$3 billion
• B)-$0.67 billion
• C)+$0.67 billion
• D)+$3 billion
• E)+$5 billion

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Definitions:

Great Lakes

A group of five large, interconnected freshwater lakes located on the border between the United States and Canada, significant for their combined area, volume, and role in North American commerce and navigation.

Facilitated

To facilitate means to make an action or process easier or to assist in the progress of something, often by providing necessary resources, information, or support.

Lafayette's Visit

Refers to the tour of the United States by the Marquis de Lafayette, a French aristocrat and military officer who fought in the American Revolutionary War, celebrated as a hero during his visit in the early 19th century.

Federalists

Members of a political group in the early United States advocating for a strong federal government and the ratification of the Constitution.