The ways the Fed can inject reserves into the banking system include:

Question

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The most common way the Fed injects reserves into the banking system is by purchasing securities from banks. This increases the size of the Fed's balance sheet, which in turn increases the amount of reserves held by banks.

Answer: B and C are incorrect. Increasing the discount rate makes it more expensive for banks to borrow from the Fed and would actually reduce the amount of reserves held by banks. Making loans to non-bank corporations is not a typical way the Fed injects reserves into the banking system.

Answer: D is also incorrect. Selling securities would reduce the size of the Fed's balance sheet, leading to a reduction in reserves held by banks.

The Ways the Fed Can Inject Reserves into the Banking