Open market operations are the Question 7 options: buying and selling of Federal
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Question
Open market operations are the Question 7 options:
buying and selling of Federal Reserve Notes in the open market.
means by which the Fed acts as the government's banker.
buying and selling of government securities by the Treasury.
means by which the Fed supplies the economy with currency.
buying and selling of government securities by the Fed.
When the Fed increases the required-reserve ratio, a bank's
Question 9 options:
required reserves are unaffected.
required reserves are increased.
required reserves are decreased.
excess reserves are decreased.
b and d
When the Fed sells government securities to a bank,
Question 10 options:
the bank's assets and liabilities decrease by the amount of the sale.
the bank's assets and liabilities increase by the amount of the sale.
the magnitude of the bank's assets is unaffected by the sale, and only the composition is affected.
the bank's liabilities are unaffected by the sale.
c and d
required reserves are unaffected.
required reserves are increased.
required reserves are decreased.
excess reserves are decreased.
b and d
When the Fed sells government securities to a bank,
Question 10 options:
the bank's assets and liabilities decrease by the amount of the sale.
the bank's assets and liabilities increase by the amount of the sale.
the magnitude of the bank's assets is unaffected by the sale, and only the composition is affected.
the bank's liabilities are unaffected by the sale.
c and d
Explanation / Answer
Q7. The open market operations are buying and selling of the government securities by the FED.
Q9. When the Fed increases the required reserve ratio, a bank’s required reserves are increased and excess reserves are decreased (answer is b and d since increasing the reserve ratio is a contractionary policy which increases the reserves and lowers the money supply)
Q10. When the Fed sells government securities to a bank then the magnitude of the bank's assets is unaffected by the sale, and only the composition is affected and the bank’s liabilities are unaffected by the sale. (answer is c and d since purchasing the securities will reduce the cash balance lowering the assets and the amount of government securities bought will increase the asset side by that amount.)
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