When the central bank purchases securities in open market operations, what is the immediate effect on bank reserves?
Explanation
The central bank credits the selling bank's reserve account, adding liquidity to the system.
Other questions
Which of the following is considered the primary objective of most central banks?
Which function of money allows it to be used to value goods and services in a consistent manner?
What components make up 'Narrow Money' according to the provided text?
Which of the following best describes 'Broad Money'?
One of the roles of a central bank is to act as a 'Lender of Last Resort'. What does this imply?
Which of the following is NOT a tool used by central banks to implement monetary policy?
If a central bank wants to implement expansionary policy, which action should it take?
Which action by the central bank represents a contractionary monetary policy?
In a fractional reserve banking system, how is the money multiplier calculated?
If the reserve requirement is 20 percent, what is the money multiplier?
A customer deposits 1,000 USD into a bank. If the reserve ratio is 10 percent, what is the total amount of money created in the banking system from this deposit?
What is the equation for the Quantity Theory of Money?
According to the concept of 'Money Neutrality' in the long run, an increase in the money supply primarily affects which variable?
Who believes that money is NOT neutral in the short run?
If the Money Supply is 500, Velocity is 4, and Real Output is 1,000, what is the Price level according to the Quantity Theory of Money?
In the monetary transmission mechanism, how does an increase in the official interest rate affect asset prices?
What is the expected impact on the exchange rate when the central bank increases the interest rate?
Which of the following is a limitation of the effectiveness of monetary policy known as a 'liquidity trap'?
What is the 'Neutral Interest Rate' defined as?
If the Policy Rate is 4 percent and the Neutral Interest Rate is 3 percent, the monetary policy is considered:
If the real trend rate of growth is 2 percent and long-run expected inflation is 3 percent, what is the neutral interest rate?
Which of the following is an essential quality of an effective central bank?
What does 'Target independence' mean for a central bank?
What is a potential consequence of 'Exchange rate targeting' for a developing country?
According to the text, what is the net effect of exchange rate targeting on inflation?
How is the supply of money depicted in the graphs provided in the text?
What happens to the demand for money when interest rates increase?
Which of the following describes the interaction of 'Expansionary Fiscal Policy' and 'Contractionary Monetary Policy'?
If both Fiscal and Monetary policies are Expansionary, what is the likely impact on Output?
Which cost of inflation is associated with 'Unexpected inflation'?
What is meant by 'Shoe leather costs' in the context of inflation?
What does the term 'Menu costs' refer to?
Which combination of policies results in 'Interest rates vary' (indeterminate direction) according to the text?
If a central bank uses 'Interest rate targeting', what is the most widely used method for making decisions?
What happens when the money supply increases while specific interest rates rise above the target band?
What is the primary risk of 'Unexpected inflation' regarding the business cycle?
Which of the following is defined as 'Narrow Money' in the text?
If the Reserve Ratio is 5 percent, what is the Money Multiplier?
Under the 'Quantity Theory of Money', what represents 'V'?
What is the effect of 'Expansionary Monetary Policy' on domestic demand?
If a country has 'High capital mobility', 'Fixed exchange rates', and 'Independent monetary policy', which of these can it NOT maintain according to the 'Impossible Trinity' (implied by limitations section)?
Which of the following defines 'Transparency' for a central bank?
What is the equation for calculating Total Amount of Money Created given a new deposit?
If Real Output is 200, Velocity is 5, and Money Supply is 100, what is the Price level?
What role does the central bank play regarding the government?
If the Central Bank sells securities, what is the impact on interest rates?
Which phrase describes the relationship between the central bank's policy rate and the neutral rate for an Expansionary policy?
What happens to 'Growth expectations' when the central bank increases the interest rate?
Which entity is the 'Sole supplier of currency'?