All else equal, the _____ the value of Treasury securities purchased by the Federal Reserve and the _____ the amount of cash held by individuals, the higher will be the amount of money created.

Question

Quizplus · Accepted Answer

When the Federal Reserve purchases Treasury securities, it increases the reserves of banks, allowing them to create more money through lending. If individuals hold less cash (i.e., more of their money is in the bank), banks have more funds to lend, further increasing the money supply.

All Else Equal, the _____ the Value of Treasury Securities