Suppose Trust Bank has $500 million in assets and $400 million in liabilities. The Fed purchases $45 million in bonds from the bank. Which of the following is a likely consequence of the Fed's action?
a. An increase in the bond holdings of Trust Bank by $45 million and a decrease in the bank's reserves by $45 million
b. A decrease in both the bond holdings and reserves of Trust Bank by $45 million
c. An increase in both the bond holdings and reserves of Trust Bank by $45 million
d. A decrease in the bond holdings of Trust Bank by $45 million and an increase in the bank's reserves by $45 million
d
You might also like to view...
Whenever U.S. government spending increases, thereby increasing the demand for real balances and the rate of interest, the currency will appreciate and there is a potential for:
A) overshooting. B) crowding out. C) a Republican backlash. D) recession.
Prices usually allocate resources efficiently because they allocate
A. consumption to the highest cost of good or service.
B. resources to the lowest value good or service.
C. consumption to the lowest value good or service.
D. resources to the highest value good or service.