When the Fed uses open market operations to sell some of its Treasury securities, there will be
A)an outward shift in the supply schedule of loanable funds.
B)an inward shift in the supply schedule of loanable funds.
C)no shift in the supply schedule of loanable funds.
D)an outward shift in the demand schedule for loanable funds.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells Treasury securities through open market operations, it effectively removes money from the banking system, as the purchasers of these securities pay the Fed, which reduces the reserves of the banks. This action decreases the amount of money available for banks to lend, leading to an inward shift in the supply schedule of loanable funds.

When the Fed Uses Open Market Operations to Sell Some