If the Fed purchases federal government bonds on the open market, bank reserves will ____, leading to a(n)_______ in the money supply.

Question

Quizplus · Accepted Answer

When the Fed purchases federal government bonds on the open market, bank reserves increase. This leads to an increase in the money supply since banks can now lend out more money due to their increased reserves. Therefore, choice C (increase; increase) is the correct answer.

If the Fed Purchases Federal Government Bonds on the Open