Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result?
A. Northern’s loan assets increase by $30 million
B. Northern’s bond assets increase by $30 million
C. Northern’s net worth changes by $30 million
D. the money supply in the economy decreases
Answer:A
Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result?
A. Northern’s loan assets increase by $30 million B. Northern’s bond assets increase by $30 million C. Northern’s net worth changes by $30 million D. the money supply in the economy decreases
Explanation: Type: Multiple Choice