The Federal Reserve makes open market purchases of bonds. What is likely to happen to excess reserves and the number of loans that banks make? a. excess reserves increase; banks make less loans b. excess reserves decrease; banks make less loans c. excess reserves decrease; banks make more loans d. excess reserves increase; banks make more loans

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Monetary System
Section: Chapter Questions
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The Federal Reserve makes open market purchases of bonds. What is likely to happen to excess reserves and the number of loans that banks make?

a. excess reserves increase; banks make less loans

b. excess reserves decrease; banks make less loans

c. excess reserves decrease; banks make more loans

d. excess reserves increase; banks make more loans

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