Question

If the Fed buys U.S. government securities from banks, the federal funds rate ________ and banks' reserves ________.

Answer 1

If the Fed buys U.S. government securities from banks, the federal funds rate falls and banks' reserves increase.

Fed's Monetary Policy

• Price stability and full employment, the Federal Reserve's two legally mandated goals, are necessary to ensure a healthy and expanding economy in the United States.
• In the past, the Fed has achieved this via modifying reserve requirements, conducting open market operations (OMO), and influencing short-term interest rates.
• By acquiring government assets, the Fed helps to boost bank reserves and bring down the federal funds rate. Government securities will be sold by the Fed on the open market.
• The Fed reduces the amount of money in circulation by selling government assets, which raises the federal funds rate.
• OMO has an impact on interest rates as well because when the Fed purchases bonds, prices are pushed up and rates are lowered; conversely, when the Fed sells bonds, prices are pushed down and rates are raised.

To learn more about Fed's Monetary Policy refer to:

brainly.com/question/14158316

#SPJ4