A decrease in the quantity of reserves supplied to commercial banks could be the result of
A) the sale of government securities by the Federal Reserve.
B) an increase in the exchange rate.
C) a decrease in the governmentʹs budget deficit.
D) a decision by U.S. households to hold less currency.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells government securities, it decreases the amount of reserves in the banking system. This leads to a decrease in the quantity of reserves supplied to commercial banks.

A Decrease in the Quantity of Reserves Supplied to Commercial