question archive An open market sale by the Fed A
An open market sale by the Fed A
Subject:EconomicsPrice:2.88 Bought3
An open market sale by the Fed
A. increases the money supply, which leads to increased interest rates and a fall in investment spending.
B. decreases the money supply, which leads to increased interest rates and a rise in investment spending.
C. decreases the money supply, which leads to increased interest rates and a fall in investment spending.
D. increases the money supply, which leads to decreased interest rates and a fall in investment spending.
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- An open market sale by the Fed C. decreases the money supply, which leads to increased interest rates and a fall in investment spending.
An open market sale occurs when the US Fed sells government securities such as Treasury bonds in the open market. Such sale decreases the money supply from the market as the buyers have to give the US Fed money in exchange for the government securities. A decrease in money supply increases the cost of borrowing for the borrowers, thereby leading to a decrease in investment spending as well.
