The funds of Lutsan City Bank decreased after the Federal Reserve cashed the checks that it received after selling government securities. As a result, the bank had to cut back on its loan offerings as it did not have sufficient funds to provide loans. This scenario exemplifies _____.

Question

Quizplus · Accepted Answer

Open market operations involve the buying and selling of government securities by the Federal Reserve to control the money supply. In this case, the sale of securities led to a decrease in the bank's funds, affecting its ability to offer loans.

The Funds of Lutsan City Bank Decreased After the Federal