If the Fed sells a T-bill to an individual rather than to a commercial bank, how will this affect the money supply?
A)It will increase the money supply.
B)It will increase the checking account balance of the individual.
C)It will have no effect on the money supply.
D)It will decrease the money supply.

Question

Quizplus · Accepted Answer

When the Fed sells a T-bill to an individual, the individual pays for it with money from their bank account. This reduces the amount of money in circulation because the money used to buy the T-bill is effectively removed from the economy, thus decreasing the money supply.

If the Fed Sells a T-Bill to an Individual Rather