Suppose the Fed conducts an open market sale. We can expect this transaction to
A) reduce the money supply, increase bond prices, and lower interest rates.
B) increase the money supply, lower bond prices, and lower interest rates.
C) increase the money supply, raise bond prices, and lower interest rates.
D) reduce the money supply, reduce bond prices, and increase interest rates.
Ans: D) reduce the money supply, reduce bond prices, and increase interest rates.
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Which of the following is likely to happen if a contractionary monetary policy is adopted?
A) Real wages will fall. B) The aggregate price level will increase. C) Equilibrium unemployment will fall. D) The real interest rate will increase.
Jake sells Star Wars memorabilia on eBay. His annual revenue is $42,000 per year, the explicit costs of his business are $10,000, and the opportunity costs of his business are $18,000 per year. What is his economic profit?
A) $14,000 B) $24,000 C) $32,000 D) $34,000