When the Federal Open Market Committee (FOMC) buys $1000 worth of bonds from the Hometown Bank, what immediate effect occurs?

When the Federal Open Market Committee (FOMC) buys $1000 worth of bonds from the Hometown Bank, the immediate effect is that the Hometown Bank has more reserves and can now offer additional loans. This transaction increases the bank's reserve balance because the bank receives cash in exchange for the bonds it sells.

Having more reserves means that the bank has a greater capacity to lend money to borrowers. In this context, the increase in reserves enhances the bank's ability to issue new loans, thereby stimulating economic activity. This process is critical for monetary policy as it influences the overall money supply in the economy.

The other options suggest outcomes that do not align with the mechanics of central bank operations. For instance, fewer reserves and a decrease in loans contradict the immediate effect of the bond purchase, while a decrease in the money supply and rising interest rates do not accurately reflect the outcomes of the FOMC's bond-buying action, which is generally aimed at increasing liquidity and encouraging lending.