When the Fed buys bonds from the public,it decreases the flow of reserves to the banking system.
When the Fed buys bonds from the public,it increases the reserves of the banking system.

Question

Quizplus · Accepted Answer

When the Fed buys bonds from the public, it pays for the bonds by creating new reserves, increasing the flow of reserves to the banking system. Therefore, the statement "When the Fed buys bonds from the public, it decreases the flow of reserves to the banking system" is false.

When the Fed Buys Bonds from the Public,it Decreases the Flow