- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 4. Monetary Policy
- Subject 2. Monetary Policy Tools and Monetary Transmission
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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