Which of the following transactions occur when the fed sells government securities to a commercial bank?
a. The commercial bank gives up their security.
b. The Fed increases the reserves of the commercial bank.

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19-12-2022
Business

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Which of the following transactions occur when the fed sells government securities to a commercial bank?
a. The commercial bank gives up their security.
b. The Fed increases the reserves of the commercial bank.

Answer :

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kumarprabhat kumarprabhat · Answer 1 · 2022-12-23T15:16:21-05:00

OPTION A When the federal government sells government securities to a commercial bank, the bank relinquishes its security.

The money supply shrinks and commercial bank reserves drop as the Federal Reserve sells government securities. The Taylor Rule is the name for the monetary policy formula that specifies how much the central bank should adjust the federal funds rate in response to an inflation or GDP divergence from targets.

Cash is transferred to these institutions when the Fed purchases assets on the open market, expanding the country's money supply. On the other hand, when the Fed sells government securities, these banks have less money available to them, which results in a reduction in the country's money supply.

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Which of the following transactions occur when the fed sells government securities to a commercial bank? a. The commercial bank gives up their security. b. The Fed increases the reserves of the commercial bank.

Answer :

Other Questions

Which of the following transactions occur when the fed sells government securities to a commercial bank?
a. The commercial bank gives up their security.
b. The Fed increases the reserves of the commercial bank.