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If the Fed Sells Government Securities to Commercial Banks in the Open

Question 18

Multiple Choice

If the Fed sells government securities to commercial banks in the open market:

A) the Fed gives the securities to the commercial banks, and the commercial banks pay for them by writing a check that increases their reserves at the Fed.
B) the Fed gives the securities to the commercial banks, and commercial banks pay for them by writing a check that decreases their reserves at the Fed.
C) commercial banks give the securities to the Fed, and the Fed pays for them by increasing the reserves of commercial banks at the Fed.
D) commercial banks give the securities to the Fed, and the Fed pays for them by decreasing the reserves of commercial banks at the Fed.

Correct Answer: