When the Federal Reserve buys U.S.government securities on the open market,this tends to ____ bank reserves and ____ the money supply.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys U.S. government securities on the open market, it pays for these securities by crediting the reserve accounts of the banks from which it buys them. This action increases the reserves of the banks, which in turn can lend more, thereby increasing the money supply.

When the Federal Reserve Buys U