An open-market purchase by the Federal Reserve withdraws excess reserves from the banking system and causes the money supply to contract.

Name: An open-market purchase by the Federal Reserve withdraws excess reserves from the banking system and causes the money supply to contract.
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Question

Quizplus · Accepted Answer

An open-market purchase by the Federal Reserve injects money into the banking system, increasing excess reserves and expanding the money supply.

An Open-Market Purchase by the Federal Reserve Withdraws Excess Reserves