Rather than making loans, banks may decide to use excess reserves to buy bonds from the public.
Question:
Rather than making loans, banks may decide to use excess reserves to buy bonds from the public. In doing so, banks merely credit the checkable-deposit accounts of the bond sellers, thus creating checkable-deposit money. Money vanishes when banks sell bonds to the public because bond buyers must draw down their checkable-deposit balances to pay for the bonds.
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Related Book For
Economics Principles Problems And Policies
ISBN: 9780073511443
19th Edition
Authors: Campbell Mcconnell ,Stanley Brue ,Sean Flynn
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