Describe the channels through which an open market sale of bonds by the Fed affects output in a closed economy
What will be an ideal response?
An open market sale of bonds leads to a leftward shift in the money supply. As a result, interest rates increase, which in turn reduce investment. The lower levels of investment translate into lower output levels.
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A choice made by comparing all relevant alternatives systematically and incrementally is
A) an opportunity cost. B) a choice on the margin. C) a benefit. D) a sunk cost. E) a choice made in the social interest.
According to your textbook, which best explains the fact that income inequality has increased in the U.S. since 1980?
A) A growing distrust of the efficacy of federal government spending programs combined with a rising concern over federal budget deficits B) A widening gap between the wages of skilled and extensively-educated workers and the wages of those with fewer skills and less education C) The impact of cheaply-produced and low-priced foreign imports D) Government deregulation of business