Which economic effect does a central bank hope to achieve by selling large amounts of treasury securities?

O A. It hopes to reduce the amount of money available for lending.
B. It hopes to lower interest rates on banks and other private lenders.
C. It hopes to encourage businesses to hire more employees.
O D. It hopes to encourage banks to increase their reserve rate.

A. It hopes to reduce the amount of money available for lending.

Explanation:

Usually, the central bank(Federal reserve) control the supply of money in circulation in the economy so that the nation's economy would be healthy. One of the ways through which the federal reserve controls the quantity of money in circulation is by selling or purchasing of government securities through a process known as open market operation.

If the federal reserve sells government securities such as treasury bills, in large quantities, its aim is to reduce the amount or quantity of money available to commercial banks for lending, hence mop up the quantity of money in circulation.

Also, if the federal reserve buys government securities, its aim is to make more money available in large quantities to commercial banks and other institutions, hence have more cash to lend people.

It hopes to reduce the amount of money available for lending.

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