If the Fed buys government securities,then
A)the quantity of money is not changed,just its composition.
B)new bank reserves are created.
C)the quantity of money decreases.
D)bank reserves are destroyed.
E)banks' excess reserves decrease.

Question

Quizplus · Accepted Answer

When the Fed buys government securities from banks and other financial institutions, it pays for them by crediting the banks' reserve accounts. This increases the level of bank reserves and creates new bank reserves in the banking system, providing more liquidity and potentially increasing lending and investment. However, it does not directly change the quantity of money in circulation, but rather alters the composition of the money supply.

If the Fed Buys Government Securities,then