If the Fed expects currency holdings to fall,it conducts open market ________ to offset the expected ________ in reserves.
A)purchases;increase
B)purchases;decrease
C)sales;increase
D)sales;decrease

Question

Quizplus · Accepted Answer

If the Fed expects currency holdings to fall, it means that banks and other financial institutions will have excess reserves. To reduce these excess reserves, the Fed would conduct open market sales, which would decrease reserves to offset the expected decrease in currency holdings.

If the Fed Expects Currency Holdings to Fall,it Conducts Open