If the Federal Reserve sells securities to 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 fall
B) Interest rates will fall
C) Excess reserves will decline, at least temporarily
D) Loans and investments will decrease
E) All of the above are likely to occur following the open-market sales described

Question

Quizplus · Accepted Answer

When the Federal Reserve sells securities to depository institutions, it effectively reduces the amount of reserves those institutions hold. This reduction in reserves can lead to an increase in interest rates, as there is less money available for lending. Therefore, the event not likely to occur is a fall in interest rates.

If the Federal Reserve Sells Securities to Depository Institutions, One