When the Fed purchases securities, the total funds of commercial banks ____ by the market value of the securities purchased by the Fed. This activity initiated by the FOMC's policy directiveisreferred to as a(n) ____ of money supply growth.
A) increase; loosening
B) decrease; tightening
C) decrease; loosening
D) increase; tightening
E) none of the above

Question

Quizplus · Accepted Answer

When the Fed purchases securities, it injects money into the banking system, increasing the total funds of commercial banks. This is referred to as a loosening of money supply growth, as it aims to increase the money supply and stimulate economic activity.

When the Fed Purchases Securities, the Total Funds of Commercial