If the Fed Makes an Open Market Purchase of $1

question 146

Multiple Choice

If the Fed makes an open market purchase of $1 million of government securities,the monetary base

• A)is decreased by $1 million.
• B)is unchanged in size,though its composition changes.
• C)is increased by $1 million.
• D)will decrease by a multiple of $1 million over time.
• E)will increase by a multiple of $1 million over time.

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Definitions:

Fiscal Year

A twelve-month period used for accounting purposes and preparation of financial statements, which may not align with the calendar year.

Withdrawals

The act of taking out cash or other assets from a business by the owner for personal use.

Investments

Financial assets purchased with the expectation they will generate income or appreciate in the future.

Balance Sheet

The balance sheet is a financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.