A decrease in the quantity of reserves held by commercial banks could be the result of
A) a decision by U.S. households to hold less currency.
B) the sale of government securities by the Federal Reserve.
C) a decrease in the government's budget deficit.
D) an increase in the exchange rate.

Question

Quizplus · Accepted Answer

The sale of government securities by the Federal Reserve to commercial banks reduces the reserves of those banks because they pay for these securities with their reserves, leading to a decrease in the quantity of reserves held by commercial banks.

A Decrease in the Quantity of Reserves Held by Commercial