When the government sell Treasury securities via open market operations, there will be...
A)an increase in the banks' incentive to lend
B)a decrease in the banks' incentive to lend
C)an increase in the investors' incentive to buy the Treasury securities
D)a general increase in the volatility of the banks' stock price
E)both c and d

Question

Quizplus · Accepted Answer

When the government sells Treasury securities via open market operations, it effectively removes liquidity from the banking system by transferring money from the banks to the government. This reduces the amount of money banks have available to lend, thus decreasing their incentive to lend.

When the Government Sell Treasury Securities Via Open Market Operations