If the Federal Reserve System buys government securities from commercial banks and the public,
A) commercial bank reserves will decline.
B) commercial bank reserves will be unaffected.
C) it will be easier to obtain loans at commercial banks.
D) the money supply will contract.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys government securities from commercial banks and the public, it increases the reserves of commercial banks, making it easier for them to lend more money. This action is part of an expansionary monetary policy aimed at stimulating economic growth.

If the Federal Reserve System Buys Government Securities from Commercial