Suppose a bank with no excess reserves buys Treasury securities from the Fed. In order to raise the additional funds necessary to meet its reserve requirements the bank may

Question

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When a bank buys Treasury securities from the Fed and needs to raise additional funds to meet its reserve requirements, it can sell Treasury securities to another bank. This action converts securities into cash, increasing the bank's reserves without affecting its loans outstanding, demand deposit liabilities, or necessitating the purchase of more securities.

Suppose a Bank with No Excess Reserves Buys Treasury Securities