The net effect on the nation's money supply and legal reserves held of Treasury borrowings from the nonbank public is an increase in the money supply and a decrease in legal reserves.

Question

Quizplus · Accepted Answer

Treasury borrowings from the nonbank public do not directly increase the money supply or decrease legal reserves. These transactions involve the exchange of money for Treasury securities, which shifts funds from the public to the Treasury but does not alter the total amount of money in circulation or the reserves held by banks.

The Net Effect on the Nation's Money Supply and Legal