6. Which of the following does NOT occur when a commercial bank makes a loan? a.

Question

6. Which of the following does NOT occur when a commercial bank makes a loan? a. The money supply increases b. The bank increases its liabilities c. The borrower increases their liabilities d. The bank increases its assets 7. When a central bank buys a government security from an individual, what effect does this have on the amount of money in circulation a. Increases by the amount of the purchase times the money multiplier b. Decreases by the amount of the purchase c. Decreases by an amount more than the purchase d. Does not change

Explanation / Answer

6.

b. the bank increases its liabilities

because loans are assets for the bank

the above is the answer

7.

a. is the answerr

because central banks buys these bonds using new currency issuance leading to higher money supply

the above are the answers

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