Suppose That the Treasury Decides to Spend $12 Billion on a Given

Multiple Choice

Suppose that the Treasury decides to spend $12 billion on a given day. Because about $12 billion in new tax revenues are expected to replenish the Treasury's account at the Fed a week later, the best policy for the Fed to pursue if it wishes to stabilize reserves is to

A) do a $12 billion government security repurchase agreement.
B) do a $12 billion government security reverse repurchase agreement.
C) buy $12 billion in government securities outright and hold them to prevent bank reserves from falling.
D) sell $12 billion in government securities to prevent bank reserves from rising.