Open market operations versus discount loans Consider an expansionary open market operation. Suppose the Federal Reserve buys government securities from the nonbank public. Suppose that the sellers of government securities cash the checks and hold on to the cash. Then, ceteris paribus, bank reserves currency in circulation , and thus the monetary base will Suppose now that the Federal Reserve wants to increase the monetary base by increasing bank reserves only. Which of the following actions enables the Fed to achieve its goal?
a- Require the non-banking public to repay discount loans
b- Buy the government securities exclusively from commercial banks Lend to the non-banking public through the term auction facility
c- Lend to commercial banks through the term auction facility By lending to commercial banks through the discount window, the Federal Reserve alters and thus affects