If the Fed decides to reduce bank reserves,it can

Question

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When the Fed sells government bonds, bank reserves decrease. This happens because when banks purchase bonds, the money they use to pay for them is transferred out of their reserve accounts at the Fed and into the accounts of whoever sold them the bonds. By reducing bank reserves, the Fed can encourage banks to lend less, which can help control inflation. Purchasing government bonds would have the opposite effect and increase bank reserves. Extending discount loans to banks would increase bank reserves, as banks would receive more funds. Printing more currency does not directly affect bank reserves.

If the Fed Decides to Reduce Bank Reserves,it Can