The sale of government securities by the Fed leads to

Question

Quizplus · Accepted Answer

The sale of government securities by the Fed leads to a contraction in bank lending, an increase in the federal funds rate, and a decrease in bank reserves. When the Fed sells government securities, banks have less money to lend, which leads to a contraction in bank lending. At the same time, the decrease in bank reserves increases the federal funds rate as banks compete for scarce reserves. Therefore, all of the above answers are correct.

The Sale of Government Securities by the Fed Leads to