Question

If the fed injects reserves into the banking system and they are held as excess reserves, then the money supply.

Answer 1

If the fed injects reserves into the banking system and they are held as excess reserves, then the money supply would increase.

What is the impact of the Fed injecting reserves into the banking system?

When the Fed injects reserves into the banking system which are held as excess reserves, this is an example of an expansionary monetary policy. This step would increase the capacity of banks to make loans. This would increase the money supply.

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