If the Federal Reserve purchases securities from depository institutions, one of the following events is not likely to occur, according to the discussion in your text. Which event is not likely to occur?
A) Total reserves of depository institutions will rise
B) Interest rates will rise
C) Excess reserves will rise, at least temporarily
D) Loans and investments will increase
E) All of the above are likely to occur following the open-market purchase described

Question

Quizplus · Accepted Answer

When the Federal Reserve purchases securities from depository institutions, it increases the reserves of those institutions. This increase in reserves typically leads to a decrease in interest rates, not an increase, as the supply of money in the economy is increased. Choices A, C, and D are effects that are likely to occur following such a purchase, making B the correct answer as it is not likely to occur.

If the Federal Reserve Purchases Securities from Depository Institutions, One