The effects of the open market purchase of bonds by the central bank will be all of the following except:
A) higher excess reserves of banks leading to more lending from banks.
B) higher monetary base.
C) lower bank-deposit-holdings of non-bank public.
D) lower money supply.

Question

Quizplus · Accepted Answer

An open market purchase of bonds by the central bank increases the monetary base and excess reserves of banks, encouraging more lending. This action typically leads to a higher money supply, not lower, as it injects more money into the banking system.

The Effects of the Open Market Purchase of Bonds by the Central