Question

Through open market operations, the Federal Reserve buys and sells government securities to influence the supply of bank reserves. When the Fed wants to increase excess reserves held by banks, it does what?

Answer 1

the answer is buy bonds

Answer 2

Buys Securities

Step-by-step explanation:

In the open market operation the fed buys and sells government securities.Treasury bonds, bills and notes are the government securities. Federal government buys securities if it wants to increase the money flow. It sells securities when it wants to reduce the flow. The government purchases securities from the banks and pays it with credits, the bank keeps a portion of this money and lends the excess money to other banks. It lowers the fund rate ,increases the amount of money in the banking system and boosts the economy. If the feds want to decrease the money supply it sells the securities.