The Fed buys 50,000 of government securities from Commerce Bank. ...

[yoroshambo]

The Fed buys 50,000 of government securities from Commerce Bank. The desired reserve ratio is 25 percent. What is the change in Commerce Bank's total reserves and its excess reserves?
 
  What will be an ideal response?

Question 2

Among the United States, Finland, and South Africa, income is distributed most equally in ________ and least equally in ________.
 
  A) the United States; South Africa
  B) Finland; South Africa
  C) Finland; the United States
  D) South Africa; the United States

[bpool94]

Answer to Question 1

When the Fed buys 50,000 of government securities from Commerce Bank, Commerce Bank's total reserves increase by 50,000. However, because Commerce Bank's deposits have not changed, none of these additional reserves are desired reserves, so Commerce Bank's excess reserves also increase by 50,000.

Answer to Question 2

B