when the public's demand for cash declines—after the holiday season, for example—banks find they have more cash than they need and they deposit the excess at the fed. because banks pay the fed for cash by having their reserve accounts debited, the level of reserves in the nation's banking system drops when the public's demand for cash rises; similarly, the level rises again when the public's demand for cash subsides and banks ship cash back to the fed. the fed offsets variations in the public's demand for cash that could introduce volatility into credit markets by implementing open market operations.