Open market purchases by the Fed may

Name: Open market purchases by the Fed may
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Open market purchases by the Fed increase reserves in the banking system, as the Fed pays for the securities with newly created reserves. This in turn typically leads to an increase in the level of currency in circulation, as banks have more reserves to lend and the public has more access to credit. Therefore, both reserves and currency in the hands of the public increase as a result of open market purchases.

Open Market Purchases by the Fed May