The purchase of existing U.S.Treasury securities by the Federal Reserve:

Question

Quizplus · Accepted Answer

When the Federal Reserve purchases existing U.S. Treasury securities, it injects new money into the economy, thereby increasing the money supply. This is because the Federal Reserve pays for the securities by crediting the account of the bank where the securities were held, which increases the bank's reserves. Banks can then use these reserves to make loans, which increases the amount of money in circulation.

The Purchase of Existing U