An open market sale of government securities by the Fed will cause which of the following?

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  1. An open market sale of government securities by the Fed will cause which of the following?
    A. An excess quantity of reserves demanded and a reduction in the federal funds rate.
    B. An excess quantity of reserves demanded and an increase in the federal fund rate.
    C. An excess quantity of reserves supplied and a reduction in the federal fund rate.
    D. An excess quantity of reserves supplied and an increase in the federal fund rate.

  2. The purchase of government bonds by the Fed leads to an:
    A. increase in the supply of bonds and a decrease in bond prices.
    B. increase in the demand of bonds and a decrease in the price of bonds.
    C. decrease in the supply of bonds and a increase in bond prices.
    D. decrease in the demand of bonds and a increase in the price of bonds.

  3. Due to the existence of FDIC, banks:
    A. have not changed their behavior even with the existence of insurance.
    B. become more cautious in making loans.
    C. may make riskier loans knowing that their depositors are insured.
    D. are no longer concerned about net worth.