When the Fed conducts open-market purchases,
A)it buys Treasury securities,which increases the money supply.
B)it buys Treasury securities,which decreases the money supply.
C)it borrows money from member banks,which increases the money supply.
D)it lends money to member banks,which decreases the money supply.

Question

Quizplus · Accepted Answer

When the Fed conducts open-market purchases, it buys Treasury securities, which increases the money supply. This is because the Fed pays for the Treasury securities with newly created bank reserves, which increase the amount of money in circulation in the economy.

When the Fed Conducts Open-Market Purchases