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Basic Question 9 of 13
When the Fed sells securities in the open market, it ______
II. creates bank reserves.
III. directly influences the monetary base.
IV. directly influences the federal funds rate.
I. reduces bank reserves.
II. creates bank reserves.
III. directly influences the monetary base.
IV. directly influences the federal funds rate.
User Contributed Comments 2
| User | Comment |
|---|---|
| cleopatraliao | Banks use their reserves to pay for the securities so reserves decrease:) |
| magus | By extension, shouldn't the action of selling securities impact the Fed funds rate? (indirect impact) |
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Learning Outcome Statements
describe tools used to implement monetary policy tools and the monetary transmission mechanism, and explain the relationships between monetary policy and economic growth, inflation, interest, and exchange rates
CFA® 2024 Level I Curriculum, Volume 1, Module 4.