When the Fed conducts an open market purchase, the first round changes in the money creation process are that excess reserves ________, bank deposits ________, and the quantity of money ________.
A) decreases; decreases; decrease
B) increases; do not change; increase
C) decreases; increases; does not change
D) do not change; increases; increase
E) increase; increase; increases

Question

Quizplus · Accepted Answer

When the Fed conducts an open market purchase, it buys securities, which increases the reserves of banks. This increase in reserves allows banks to create more deposits, thereby increasing the quantity of money.

When the Fed Conducts an Open Market Purchase, the First