If the Federal Reserve wants to expand reserves in the banking system,it will
A) purchase government securities.
B) raise the discount rate.
C) sell government securities.
D) raise reserve requirements.

Question

Quizplus · Accepted Answer

The Federal Reserve can expand reserves in the banking system by purchasing government securities through open market operations. This increases the amount of money in circulation and puts more money in the hands of banks to lend out. Raising the discount rate would discourage banks from borrowing from the Federal Reserve and reduce reserves in the banking system, selling government securities would decrease the money supply, and raising reserve requirements would require banks to hold onto more reserves and decrease the amount of money available for lending.

If the Federal Reserve Wants to Expand Reserves in the Banking