The goal of an open market sale by the Federal Reserve is to:
A) reduce bank reserves and increase the money supply.
B) increase bank reserves and reduce the money supply.
C) reduce bank reserves and reduce the money supply.
D) increase bank reserves and increase the money supply.

Question

Quizplus · Accepted Answer

An open market sale by the Federal Reserve involves selling government securities to the public. This action reduces the reserves of the banks, as they or their customers are the buyers of these securities, which in turn reduces the money supply. This is because banks have less money to lend, leading to a decrease in the overall money supply in the economy.

The Goal of an Open Market Sale by the Federal