For the Following Questions Assume the Following Facts

question 12

Multiple Choice

For the following questions assume the following facts:
(1) Balance of Payments = 0 prior to the transactions.
(2) Person A (who lives in the United States) purchases an airplane from British Airways for $150,000.
(3) Person A pays with a check from his account at First Union Bank in the United States.
(4) British airways, since it will need dollars in 1 month, deposits the check at the Bank of England.
(5) Bank of England deposits the $150,000 at Commonwealth bank, which is located in the United States.
Due to the transactions above, what are the effects on the reserve at the Fed?

• A) Fact 2 is a decrease of $150,000, fact 5 is a decrease of $150,000, a net effect of -$300,000.
• B) Fact 3 is a decrease of $150,000, fact 5 is an increase of $150,000, a net effect of 0.
• C) Fact 3 is an increase of $150,000, fact 5 is a decrease of $150,000, a net effect of 0.
• D) Both fact 3 and fact 5 result in increases of $150,000, a net effect of +$300,000.
• E) Both fact 3 and fact 5 result in decrease of $150,000, a net effect of -$300,000.

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Definitions:

Viscous

A physical property describing a fluid that is thick and sticky, offering resistance to flow, such as honey or glycerin.

Nephron

The functional unit of the kidney, responsible for the filtration and excretion of waste products from the blood and the regulation of electrolyte and fluid balance.

Edema

A medical condition characterized by the accumulation of excess fluid in the body's tissues, causing swelling.

Albumin

A protein commonly found in blood plasma that helps maintain blood volume and pressure by regulating osmotic forces.