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

Question

Quizplus · Accepted Answer

When the Federal Reserve sells government securities, it decreases the amount of reserves in the banking system. This is because when banks purchase government securities, they pay for them by giving up reserves held at the Fed. Therefore, selling securities effectively drains reserves from the banking system.

If the Federal Reserve Wants to Drain Reserves from the Banking