When the Fed buys federal government securities on the open market from commercial banks, over time, the:
A) assets of these banks fall.
B) liabilities of the bank fall.
C) assets of the banks rise.
D) liabilities of the bank rise.

Question

Quizplus · Accepted Answer

When the Fed buys federal government securities on the open market from commercial banks, it increases the reserves of these banks. This increase in reserves allows the banks to make more loans, which leads to an increase in the assets of these banks. Therefore, over time, the assets of the banks rise.

When the Fed Buys Federal Government Securities on the Open