Asked by Cristina Valadez on Jun 11, 2024
Verified
If the Fed sells securities on the open market,this will
A) reduce banks' excess reserves.
B) increase banks' excess reserves.
C) leave banks' excess reserves unchanged.
D) lower the reserve requirement.
E) expand the money supply.
Open Market
A freely competitive market where buyers and sellers can trade goods, services, and securities without excessive regulations, often facilitating price determination through supply and demand.
Money Supply
The total volume of money available in the economy, including cash, coins, and balances held in bank accounts.
- Acquire knowledge about the methods used by the Federal Reserve to manage the money supply.
- Become familiar with the assortment of tools available for monetary policy implementation, including open market operations, the discount rate, and reserve requirements.
Verified Answer
SM
Shavon MccoyJun 11, 2024
Final Answer :
A
Explanation :
When the Fed sells securities on the open market, it reduces the amount of money in the system, which in turn reduces the amount of reserves held by banks. This reduces banks' excess reserves.
Learning Objectives
- Acquire knowledge about the methods used by the Federal Reserve to manage the money supply.
- Become familiar with the assortment of tools available for monetary policy implementation, including open market operations, the discount rate, and reserve requirements.