Question
When the Fed conducts open-market sales,
O a. it auctions term loans, which increases the money supply.
O b.it sells Treasury securities, which increases the money supply.
O c. it sells Treasury securities, which decreases the money supply.
O d.it auctions term loans, which decreases the money supply.
O a. it auctions term loans, which increases the money supply.
O b.it sells Treasury securities, which increases the money supply.
O c. it sells Treasury securities, which decreases the money supply.
O d.it auctions term loans, which decreases the money supply.
Answers
GPT-4o mini
The correct answer is:
**O c. it sells Treasury securities, which decreases the money supply.**
When the Federal Reserve (the Fed) conducts open-market sales, it sells Treasury securities to financial institutions. This action reduces the amount of reserve balances that banks hold, which effectively decreases the money supply in the economy.
**O c. it sells Treasury securities, which decreases the money supply.**
When the Federal Reserve (the Fed) conducts open-market sales, it sells Treasury securities to financial institutions. This action reduces the amount of reserve balances that banks hold, which effectively decreases the money supply in the economy.