If the Open-Market Desk at the Fed sells securities, the most likely effect is that the
A)federal funds rate decreases.
B)primary credit discount rate decreases.
C)primary credit discount rate increases.
D)federal funds rate increases.

Question

Quizplus · Accepted Answer

When the Open-Market Desk at Fed sells securities, banks have to pay for those securities, leading to a decrease in the reserves of banks. This decrease in reserves leads to an increase in the federal funds rate as the borrowing cost between banks increases. Therefore, the most likely effect of selling securities is an increase in the federal funds rate.

If the Open-Market Desk at the Fed Sells Securities, the Most