If the Fed sells $10 million in government securities to commercial banks, the size of the effect on the banks' excess reserves is not the
same as if the Fed sold the securities to the public instead.

Question

Quizplus · Accepted Answer

If the Fed sells securities to commercial banks, it would reduce the banks' excess reserves and impact their ability to lend. However, if the Fed sold those securities to the public instead, it would not directly affect banks' reserves.

If the Fed Sells $10 Million in Government Securities to Commercial