- CFA Exams
- CFA Level I Exam
- Study Session 5. Economics (2)
- Reading 16. Monetary and Fiscal Policy
- Subject 4. The Objectives of Monetary Policy
CFA Practice Question
An open market purchase of government securities by the Federal Reserve ______ banks' reserves and ______ the federal funds rate.
A. increases; lowers
B. decreases; raises
C. decreases; lowers
Explanation: When the Fed buys securities, it pays for them with newly created reserves held by banks.
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