When the Fed buys government securities,it adds to the supply of money and credit,which causes a reduction in interest rates.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys government securities, it increases the reserves of the banks, which in turn increases the supply of money and credit in the economy. This increase in supply typically leads to a reduction in interest rates, as banks have more funds to lend.

When the Fed Buys Government Securities,it Adds to the Supply