When Central Bank conducts a sale of securities, the cash reserve of commercial banks shall

The correct answer is Decrease.

Key Points When a Central Bank conducts a sale of securities, the cash reserve of commercial banks can decrease, depending on the specific circumstances and the overall impact of the sale. Here's an explanation of the process:

Central Bank's Sale of Securities:
A Central Bank, such as the Federal Reserve in the United States or the European Central Bank in the Eurozone, may conduct sales of securities as part of its monetary policy operations. These securities can include government bonds, treasury bills, or other financial instruments.

Impact on Commercial Banks:
When the Central Bank sells securities, it typically does so through open market operations. In this process, the Central Bank offers the securities to commercial banks and other financial institutions. Commercial banks can purchase these securities by using their reserves, which are funds held at the Central Bank.

Decrease in Cash Reserves:
When commercial banks participate in the purchase of securities from the Central Bank, they pay for these securities by transferring funds from their reserve accounts held at the Central Bank. As a result, the cash reserves of the commercial banks decrease.

Effects on the Money Supply:
The decrease in cash reserves of commercial banks, resulting from the purchase of securities from the Central Bank, can have implications for the money supply in the economy. Commercial banks' ability to lend and create credit is directly linked to their reserves. When reserves decrease, banks have less capacity to lend, potentially reducing the overall money supply in the economy.