In order to lower the federal funds rate, the Fed ________ government securities in open market operations, so that banks' reserves ________ and the quantity of money ________.
A) buys; decrease; increases
B) sells; decrease; decreases
C) sells; increase; decreases
D) buys; increase; increases
E) buys; decrease; decreases

Question

Quizplus · Accepted Answer

When the Fed buys government securities, it increases the reserves of banks, allowing them to lend more, which increases the money supply and lowers the federal funds rate.

In Order to Lower the Federal Funds Rate, the Fed