When the Fed conducts open-market sales,
A) it sells Treasury securities,which increases the money supply.
B) it sells Treasury securities,which decreases the money supply.
C) it borrows from member banks,which increases the money supply.
D) it lends money to member banks,which decreases the money supply.

Question

Quizplus · Accepted Answer

When the Fed conducts open-market sales, it sells Treasury securities which decreases the money supply. This is because the buyers of the securities have to pay for them, which leads to a reduction in their available funds to spend or lend. As a result, there is less money circulating in the economy, leading to a tighter credit market and higher interest rates.

When the Fed Conducts Open-Market Sales