If the Fed buys U.S.government securities from banks, the federal funds rate ________ and banks' reserves ________.

Name: If the Fed buys U.S.government securities from banks, the federal funds rate ________ and banks' reserves ________.
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Question

Quizplus · Accepted Answer

When the Fed buys U.S. government securities from banks, banks' reserves increase. As a result, the supply of funds in the federal funds market increases, which pushes down the federal funds rate. Therefore, the correct answer is A.

If the Fed Buys U