When the Fed purchases short-term government securities from banks, the primary effect on excess reserves is that they:
A)decrease.
B)increase.
C)remain constant.
D)fluctuate randomly.

Question

Quizplus · Accepted Answer

When the Fed purchases short-term government securities from banks, it pays for them by depositing funds into the banks' reserve accounts. This increases the banks' reserves, leading to an increase in excess reserves.

When the Fed Purchases Short-Term Government Securities from Banks, the Primary