When the Fed Buys $100 Million of Securities from a Commercial

question 102

Multiple Choice

When the Fed buys $100 million of securities from a commercial bank,the

• A)monetary base increases.
• B)money supply decreases.
• C)bank's reserves decrease.
• D)required reserve ratio decreases.
• E)bank is risking its depositors' money.

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Definitions:

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment, expressed as a percentage.

Net Operating Income

The total profit of a company after operating expenses are subtracted from gross profit but before income taxes and interest expenses are deducted.

Average Operating Assets

The average value of assets used in the production or operation of a company over a specific period.

Sales

The total amount of revenue generated by the sale of goods or services.