The Fed can increase reserves in the banking system through which of the following actions?

Question

Quizplus · Accepted Answer

When the Fed buys securities, it injects reserves into the banking system, thereby increasing the overall level of reserves. Option A is incorrect because selling securities would remove reserves from the banking system. Option C is incorrect because decreasing discount loans would have no impact on reserves in the banking system. Option D is incorrect because increasing the required reserve ratio would require banks to hold a larger portion of their deposits as reserves, but it would not increase the overall level of reserves.

The Fed Can Increase Reserves in the Banking System Through