If the Fed carries out an open market operation and sells U.S.government securities, the federal funds rate ________ and the quantity of reserves ________.
A) falls; increases
B) rises; increases
C) rises; does not change
D) falls; decreases
E) rises; decreases

Question

Quizplus · Accepted Answer

When the Fed sells U.S. government securities, it decreases the reserves in the banking system, leading to an increase in the federal funds rate.

If the Fed Carries Out an Open Market Operation and Sells