Over a five-year time frame, a bank uses its profits to construct several new branch offices. How will this affect the banks balance sheet?

1. assets will increase
2. liabilities will increase
3. assets and liabilities will increase
4. assets and equity will increase
5. liabilities and equity will increase

Problem 2

The purchase of existing U.S. Treasury securities by the Federal Reserve will
1. have no effect on the money supply
2. decrease the money supply
3. increase the money supply
4. decrease the reserves at banks
5. increase the amount of U.S. Treasury securities held at banks