If the Fed Sells Government Securities to the General Public

question 279

Multiple Choice

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

• A) the 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.
• B) the 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.
• C) the 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) the 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.

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