If the Fed sells government bonds to the public,then reserves
A)increase and the money supply increases.
B)increase and the money supply decreases.
C)decrease and the money supply increases.
D)decrease and the money supply decreases.

Question

Quizplus · Accepted Answer

When the Fed sells government bonds to the public, it withdraws reserves from the banking system. This results in a decrease in reserves and a decrease in the money supply, as banks have less money to lend out.

If the Fed Sells Government Bonds to the Public,then Reserves