question archive When the Fed conducts open market sales, a
When the Fed conducts open market sales, a
Subject:EconomicsPrice:2.88 Bought3
When the Fed conducts open market sales,
a. it sells Treasury securities, which increases the money supply.
b. it sells Treasury securities, which decreases the money supply.
c. it borrows from member banks, which increases the money supply.
d. it lends money to member banks which decreases the money supply.
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Option b. it sells Treasury securities, which decreases the money supply is correct
In the case of open market sale of treasury securities, the less money into hands of public such that the money supply decreases. It shifts the LM curve upward that increases the rate of interest and as the rate of interest increases then investment decreases. It causes decrease in aggregate demand that decreases both price level and output in an economy.
