On July 30 th 2009, The Federal Reserve through the Federal Reserve Bank of New
ID: 2822289 • Letter: O
Question
On July 30th 2009, The Federal Reserve through the Federal Reserve Bank of New York purchased $6.496 billion of Treasury Securities. This open market purchase of securities will:
a)
Increase interest rates to small businesses
Increase bank reserves in the Federal Reserve system
Increase the debt of the U.S.government
Shrink the money supply
Increase interest rates to small businesses
b)Increase bank reserves in the Federal Reserve system
c)Increase the debt of the U.S.government
d)Shrink the money supply
Explanation / Answer
b) Increase bank reserves in the Federal Reserve system , this open market purchase of securities transaction will bring the liquidity as well as increase in bank reserves
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