If the Fed buys government securities from depository institutions,the effect will be to

A) reduce loans and reduce the money supply.
B) reduce loans and increase the money supply.
C) increase loans and reduce the money supply.
D) increase loans and increase the money supply.
E) leave both the money supply and the loan balances unchanged.

Government Securities

Financial instruments issued by the government to borrow money from investors that usually come with a promised set of future payments.

Depository Institutions

Financial institutions that accept deposits from the public, such as banks, credit unions, and savings and loan associations.

Money Supply

The total amount of money—cash, coins, and balances in bank accounts—in circulation within a country's economy at a specific time.