An outright purchase of government securities by the Fed
A) permanently increases bank reserves.
B) temporarily increase bank reserves.
C) permanently reduces bank reserves.
D) temporarily reduces bank reserves.

Question

Quizplus · Accepted Answer

When the Federal Reserve (Fed) makes an outright purchase of government securities, it pays for these securities by adding the amount to the reserves of the banks selling the securities. This action permanently increases the bank reserves unless the Fed decides to sell the securities in the future.

An Outright Purchase of Government Securities by the Fed