If the Fed sells U.S.government securities to banks, the federal funds rate ________ and banks' reserves ________.
A) falls; increase
B) rises; do not change
C) rises; increase
D) falls; decrease
E) rises; decrease

Question

Quizplus · Accepted Answer

When the Fed sells U.S. government securities, it takes money out of the banking system, reducing banks' reserves. This decrease in reserves leads to an increase in the federal funds rate.

If the Fed Sells U