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2 years ago

If the Fed buys U.S. government securities from banks, the federal funds rate and banks' reserves .

1 answer:

8 0

If the Fed buys U.S. government securities from banks, the federal funds rate falls and banks' reserves increase.

<h3>Fed's Monetary Policy</h3>

Price stability and full employment, the Federal Reserve's two legally mandated goals, are necessary to ensure a healthy and expanding economy in the United States.
In the past, the Fed has achieved this via modifying reserve requirements, conducting open market operations (OMO), and influencing short-term interest rates.
By acquiring government assets, the Fed helps to boost bank reserves and bring down the federal funds rate. Government securities will be sold by the Fed on the open market.
The Fed reduces the amount of money in circulation by selling government assets, which raises the federal funds rate.
OMO has an impact on interest rates as well because when the Fed purchases bonds, prices are pushed up and rates are lowered; conversely, when the Fed sells bonds, prices are pushed down and rates are raised.

To learn more about Fed's Monetary Policy refer to:

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4 years ago

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Debit : Goodwill (if Payment is greater than Net Assets acquired)

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Explanation:

Hi, your question is incomplete, i tried to look for the full question online but i could not find it.

However, below is an explanation to solving the problem.

An acquisition of investee Assets and Liabilities is not a business combination transaction that requires preparation of consolidated financial statements.

A business combination is a transaction or event in which an ACQUIRER obtains CONTROL of one or more Businesses. So, if it is not a business, it is a mere ASSET ACQUISITION transaction.

Thus said, in our question investor purchases the assets and assumes the liabilities of the investee company, this is an Asset Acquisition transaction and not a Business Combination transaction.

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Below are the accounting entries to record an Asset Acquisition transaction.

Debit : All assets bought at their Fair Value Amounts

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Credit : All liabilities assumed at their Fair Value Amounts

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3 years ago

If the Fed buys U.S. government securities from banks, the federal funds rate ________ and banks' reserves ________.

If the Fed buys U.S. government securities from banks, the federal funds rate and banks' reserves .