What happens to the price of bonds when the Fed is selling bonds? What happens to the interest rate? What happens to the money supply?
What will be an ideal response?
If the Fed sells bonds, the supply of bonds in the market increases, causing the price of bonds to fall. Since the price of bonds is inversely related to the interest rate, the interest rate increases. The Fed sells bonds to reduce the money supply.
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The initial impact of an increase in government spending is to shift
A. aggregate supply to the right. B. aggregate demand to the left. C. aggregate demand to the right. D. aggregate supply to the left.
In the long run, new firms enter a perfectly competitive market when
A) normal profit is greater than zero. B) economic profit is equal to zero. C) normal profit is equal to zero. D) economic profit is greater than zero. E) the existing firms are weak because they are incurring economic losses.