If the Federal Reserve buys government bonds from the public,

Question

Quizplus · Accepted Answer

When the Federal Reserve buys government bonds from the public, it injects money into the economy. This increases the amount of reserves that banks have. As a result, banks can make additional loans, which increases the money supply. Therefore, choice C is correct. Choices A, B, and D are incorrect because they do not accurately describe the effect of the Federal Reserve buying government bonds from the public.

If the Federal Reserve Buys Government Bonds from the Public