If a bank sells a 1,000 security to the Fed and the required reserve ratio is 20 percent:
a. the bank has 1,000 in additional excess reserves, of which it can lend 800.
b. the bank has 1,000 in additional excess reserves, all of which it can lend out.
c. the bank has lost an asset and must reduce its loans.
d. the bank has lost a liability.
e. there is no change in excess reserves, since net assets do not change.
Question 2
Government outlays equal:
a. the difference between government expenditures and government revenues.
b. the sum of government expenditures and government revenues.
c. the sum of government purchases and transfer payments.
d. the difference between government purchases and transfer payments.
e. the ratio of government purchases to transfer payments.
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