If the Fed carries out an open market operation and buys U.S. government securities, the federal funds rate and the quantity of reserves .

Question

Quizplus · Accepted Answer

When the Fed buys U.S. government securities, it injects new money into the banking system. This increases the quantity of reserves available to banks, which lowers the federal funds rate because banks have less of a need to borrow reserves from other banks.

If the Fed Carries Out an Open Market Operation and Buys