Question

If the Fed sells government securities to the general public in the open market, the

A) public gives the securities to the Fed in exchange for a Fed check, which when deposited at

commercial banks will decrease their reserves at the Fed.

B) Fed gives the securities to the public; the public pays for the securities by writing checks that

when cleared will increase commercial bank reserves at the Fed.

C) public gives the securities to the Fed in exchange for a Fed check, which when deposited at

commercial banks will increase their reserves at the Fed.

D) Fed gives the securities to the public; the public pays for the securities by writing checks that

when cleared will decrease commercial bank reserves at the Fed.

Answer 1

Answer
D) Fed gives the securities to the public; the public pays for the securities by writing checks that
when cleared will decrease commercial bank reserves at the Fed.
The sell decreases money from economy so the money supply decreases which decreases reserves