Asked by Isabella Cardenas on Jul 13, 2024
Verified
When the Fed buys U.S.government securities from a bank,that bank's excess reserves and total reserves increase,but there is no change in required reserves.
Excess Reserves
Bank reserves in excess of the required minimum, which can be lent out or invested.
Total Reserves
The sum of all deposits, including cash, bank deposits, and investable assets, held by a financial institution or country.
Required Reserves
The minimum amount of reserves a bank must hold, as mandated by regulatory bodies, based on a percentage of the bank's deposit liabilities.
- Acknowledge the repercussions of the Federal Reserve's maneuvers on the reserves held by banks and the overall money supply.
- Acquire knowledge about the distinctions between excess reserves, required reserves, and total reserves.
Verified Answer
KS
Karanpreet SinghJul 17, 2024
Final Answer :
True
Explanation :
When the Fed buys U.S. government securities from a bank, it credits the bank's reserve account with the amount of the purchase. This increases the bank's total reserves and excess reserves, but there is no change in the required reserve ratio set by the Fed.
Learning Objectives
- Acknowledge the repercussions of the Federal Reserve's maneuvers on the reserves held by banks and the overall money supply.
- Acquire knowledge about the distinctions between excess reserves, required reserves, and total reserves.