The sale of government securities by the Fed leads to

Question

Quizplus · Accepted Answer

Selling government securities by the Fed reduces the amount of reserves that banks have available to lend, which leads to a contraction in bank lending. This decrease in reserves also puts upward pressure on the federal funds rate, making it more expensive for banks to borrow reserves from each other. Therefore, all of the given options (increase in federal funds rate, contraction in bank lending, and decrease in bank reserves) are the consequences of the sale of government securities by the Fed.

The Sale of Government Securities by the Fed Leads to