Answer:
d. surplus in the money market, so people will want to buy bonds.
Explanation:
The Federal Reserve System ( popularly referred to as the 'Fed') was created by the Federal Reserve Act, passed by the U.S Congress on the 23rd of December, 1913. The Fed began operations in 1914 and just like all central banks, the Federal Reserve is a United States government agency.
Generally, it comprises of twelve (12) Federal Reserve Bank regionally across the United States of America.
Like all central banks, the Federal Reserve is a government agency that is saddled with the following responsibilities;
I. It regulates banking activities in the United States of America: it has the power to supervise and regulate banks. Also, the Fed is saddled with the responsibility of selling government securities such as treasury bills to the public.
II. It provides banking services to all the commercial banks in the country because the Federal Reserve is the "lender of last resort."
III. The Fed controls the issuance of currency in United States of America: it promotes public goals such as economic growth, low inflation, and the smooth operation of financial markets.
The currency in circulation includes all of the US paper currency (dollar bill) that are available in the country while reserves refers to the minimum deposits being held for the U.S Treasury and depository financial institutions by the Fed.
Additionally, the overall sum of the United States of America treasury monetary liabilities and the Federal Reserve System's monetary liabilities is generally referred to as the monetary base.
Hence, if the Federal Reserve increases the money supply, then there would be an initial surplus of currency in the money market and as a result, people will want to buy bonds.
