If instead of buying short-term Treasury securities the Fed decides to purchase the country's supply of paper clips,the money supply:
A) will not change.
B) might expand or contract.
C) will expand.
D) will contract.

Question

Quizplus · Accepted Answer

When the Fed purchases any asset, including paper clips, it pays for these assets by increasing the reserves of banks. This action typically leads to an expansion in the money supply because banks can then lend out more based on these increased reserves, creating more money through the money multiplier effect.

If Instead of Buying Short-Term Treasury Securities the Fed Decides