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Vinil7 [7]
3 years ago
13

When the Fed sells government securities, the banks':

Business
1 answer:
kykrilka [37]3 years ago
3 0

Answer:

The correct answer is option B.

Explanation:

When the Federal reserve bank sells government securities, the banks will purchase them and pay back fed. This payment is made out of banks' reserves. This causes the reserves to decrease.  

As reserves decline, the banks will be able to provide fewer loans. Consequently, this decrease in lending will further cause the money supply to decrease.

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