-In Table 13-1, the Federal Reserve System has
A)sold $10 million in government securities to banks, taking payment in cash.
B)sold $10 million in government securities to banks, taking payment from the bank's reserves.
C)purchased $10 million in government securities from banks, paying for them with increases in banks' reserves.
D)purchased $10 million in government securities from banks, paying for them with new Federal Reserve notes.

Question

-In Table 13-1, the Federal Reserve System has
A)sold $10 million in government securities to banks, taking payment in cash. 
B)sold $10 million in government securities to banks, taking payment from the bank's reserves. 
C)purchased $10 million in government securities from banks, paying for them with increases in banks' reserves. 
D)purchased $10 million in government securities from banks, paying for them with new Federal Reserve notes.

Quizplus · Accepted Answer

The Federal Reserve System has purchased $10 million in government securities from banks, paying for them with increases in banks' reserves. This is known as an open market purchase, where the Fed buys government securities from banks, increasing banks' reserves in return. This is a form of expansionary monetary policy, aimed at increasing the money supply and stimulating economic growth.

-In Table 13-1, the Federal Reserve System Has