If the Fed carries out an open market operation and sells U.S. government securities, the federal funds rises and the quantity of money decreases.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells U.S. government securities in an open market operation, it reduces the reserves of the banking system, leading to a decrease in the quantity of money. As a result, the federal funds rate, which is the interest rate at which banks lend reserves to each other overnight, tends to rise due to the decreased supply of reserves.

If the Fed Carries Out an Open Market Operation and Sells