If the Fed purchases $20 million worth of government bonds from Bank Zip, Bank Zip will be able to increase its loans as a result of the bond purchase.

Question

Quizplus · Accepted Answer

When the Fed purchases government bonds from a bank, it injects additional cash into the bank's reserves, allowing the bank to have more money to lend out to customers. This can lead to an increase in loans and overall economic activity.

If the Fed Purchases $20 Million Worth of Government Bonds