If the Federal Reserve System sells $5 billion of government securities to commercial banks, the banks' reserves would:
A) Increase by $5 billion
B) Decrease by $5 billion
C) Be added to net worth
D) Remain the same

Question

Quizplus · Accepted Answer

When the Federal Reserve System sells government securities, it means that commercial banks purchase those securities, and in exchange, they pay with their reserves. So their reserves would decrease by $5 billion.

If the Federal Reserve System Sells $5 Billion of Government