All else equal, the _____ the value of Treasury securities purchased by the Federal Reserve and the _____ the excess reserves held by commercial banks, the lower will be the amount of money created.

Question

Quizplus · Accepted Answer

When the Federal Reserve purchases fewer Treasury securities, it injects less money into the banking system. Additionally, if commercial banks hold more excess reserves, they lend out less money, reducing the money multiplier effect and thus the total money created.

All Else Equal, the _____ the Value of Treasury Securities