When the Trading Desk sells a sufficient amount of Treasury securities, it creates a surplus of funds in the banking system. Consequently, the federal funds rate decreases along with other interest rates.

Question

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When the Trading Desk sells Treasury securities, it actually removes reserves from the banking system, leading to a decrease in the supply of funds. This typically results in an increase in the federal funds rate and other interest rates, not a decrease.

When the Trading Desk Sells a Sufficient Amount of Treasury