Suppose the government uses open market operations to buy Treasury securities from public.This will result in
A)the increase in the public confidence about the stability of the monetary system
B)the increase in the bank's incentive to hold Treasury securities
C)the decrease in the batik's incentive to hold Treasury securities
D)the increase in the amount of lending by the private sectors or banks
E)the increase in the depositors' incentive to withdraw from the banks and invest in the Treasury securities

Question

Quizplus · Accepted Answer

When the government buys Treasury securities, it increases the reserves of banks, allowing them to lend more, thus increasing the amount of lending by the private sector or banks.

Suppose the Government Uses Open Market Operations to Buy Treasury