When the Fed Sells Government Securities, the Banks

Multiple Choice

When the Fed sells government securities, the banks':

A) reserves will increase and lending will expand, causing an increase in the money supply.
B) reserves will decrease and lending will contract, causing a decrease in the money supply.
C) reserve requirements will increase and lending will contract, causing a decrease in the money supply.
D) reserves/deposit ratio will increase and lending will expand, causing an increase in the money supply.