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When a commercial bank repurchases its security from the Central Bank, the commercial bank's reserves Central Bank's assets A

Economics Nov 07, 2020

When a commercial bank repurchases its security from the Central Bank, the commercial bank's reserves Central Bank's assets A. increase; increase B. decrease; remains unchanged C. increase; decrease D. decrease; decrease E. decrease; increase

Expert Solution

Option e is correct. When a commercial bank repurchases its security from the centrak bank, the commercial bank's reserves decrease and and the central bank assets will increase..
When commercial bank sell its securities by borrowing money, its reserves will increase and central bank asset will decrease.
All other options are wrong
Because when commercial bank repurchases securities that the bank already sold to central bank to borrow money, commercial banks reserves will decrease and central bank asset will increase

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