When the Fed buys government securities (US Treasury IOUs), it: Select one: a. i

ID: 1213633 • Letter: W

Question

When the Fed buys government securities (US Treasury IOUs), it:

Select one:

a. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.

b. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public.

c. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public.

d. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.

e. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public.

e. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public.

because when they buys govt securities from banks that means banks will receive cash that would enable them to lend more.

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