If the Fed buys a U.S. government bond from a member of the public,

Question

Quizplus · Accepted Answer

When the Fed buys a U.S. government bond from a member of the public, it pays for it by crediting the seller's bank account. This creates more reserves in the banking system, which increases the ability of banks to make loans, leading to an expansion of the money supply. Therefore, the correct answer is A) the banking system has more reserves and the money supply tends to grow.

If the Fed Buys a U