If the Federal Reserve buys securities in the open market, then the money supply will _____, leading to _____ in the interest rate.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys securities in the open market, it injects money into the banking system, thereby increasing the money supply. An increased money supply typically leads to lower interest rates as there is more money available for lending.

If the Federal Reserve Buys Securities in the Open Market