Question

When a commercial bank borrows from the Fed, the reserves of the bank fall. the bank can make more loans. it must be because the bank is not meeting its reserve requirements. the money supply falls.

Answer 1

In the operation open market operartion, two policies adopted by the Federal Reserve Bank .

Contractionary monetary policy and

expansionary monetary policy .

in expansionary monetary policy ,the money supply increases from the Federal Bank so commercial bank can take loan from Federal Bank at a lower rate and it can lead to consumers at a lower rate and this causes increases in the money supply.

this operation is performed by the federal bank to increase investment and spending by the consumer in the economy .

it is not true that when commercial bank borrows from Federal Bank that means the bank is not meeting is Reserve Requirement.

so the answer is option B