To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in currency,the Federal Reserve could

Question

Quizplus · Accepted Answer

Selling Treasury securities would increase the supply of money in the economy, which can counterbalance the decrease in the money supply resulting from households and firms holding more of their money in checking account deposits. This is because selling Treasury securities to banks would increase their reserves, allowing them to lend out more money, which in turn puts more money into circulation.

To Offset the Effect of Households and Firms Deciding to Hold