13) If a person selling bonds to the Fed cashes the Fed\'s check, then reserves

Question

13) If a person selling bonds to the Fed cashes the Fed's check, then reserves ________ and currency in circulation ________, everything else held constant.

A) increase; remains unchanged B) remain unchanged; increases C) remain unchanged; declines D) decline; remains unchanged

14) If a member of the nonbank public purchases a government bond from the Federal Reserve in exchange for currency, the monetary base will ________, but reserves will ________.

A) fall; remain unchanged B) remain unchanged; rise C) remain unchanged; fall D) rise; remain unchanged

15) Suppose a person cashes his payroll check and holds all the funds in the form of currency. Everything else held constant, total reserves in the banking system ________ and the monetary base ________.

A) decrease; increases B) decrease; remains unchanged C) decrease; decreases D) remain unchanged; increases

Explanation / Answer

Answer - 13) if a person selling bonds to fed Cashes the fed checks then reserves remains unchanged and currency of circulation increases everything else else constant.

14)if a member of non Bank public purchases a government bond from the Fed in exchange for currency ,the monetary base will fall but reserves will remain unchanged .

15) suppose a person Cashes his payroll check and holds all the funds in the form of currency .Everything else held constant total reserve in the banking system remains unchanged and monetary base increase.

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