Answer:
and reserves of commercial banks both decrease.
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.
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. Also, the Fed is saddled with the responsibility of selling government securities such as treasury bills to the public.
As a result of the above, the checkable deposits and reserves of commercial banks both decrease due to an increase in the reserve ratio.
