When the Federal Reserve Bank buys or sells U.S.securities,it changes the level of reserves in the banking system,which has an effect on interest rates.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys securities, it injects cash into the banking system, increasing the level of reserve. This increases the supply of money, leading to a decrease in interest rates. Conversely, when the Federal Reserve sells securities, it reduces the level of reserves in the banking system, leading to a decrease in the money supply and an increase in interest rates.

When the Federal Reserve Bank Buys or Sells U