Asked by Ishaan Backliwal on Jul 07, 2024
Verified
When the Federal Reserve sells U.S.government securities on the open market,this tends to ____ banks reserves and ______ the money supply.
A) raise;raise
B) lower;lower
C) raise;lower
D) lower;raise
U.S. Government Securities
Financial instruments issued by the United States Department of the Treasury to finance government spending and obligations, considered low-risk investments.
- Recognize the criticality of open market operations executed by the Federal Reserve, entailing the buying and selling of government bonds.
Verified Answer
AR
Allison RabrenJul 13, 2024
Final Answer :
B
Explanation :
When the Federal Reserve sells U.S. government securities on the open market, it is essentially taking money out of circulation and placing it in its own accounts. This action reduces the reserves that banks have available to lend, thereby lowering the money supply.
Learning Objectives
- Recognize the criticality of open market operations executed by the Federal Reserve, entailing the buying and selling of government bonds.