Figure 11-1
-Refer to Figure 11-1. If the Fed wants to achieve the results shown in Panel (b), it should
A) lower the discount rate.
B) decrease margin requirements.
C) decrease reserve requirements.
D) sell government bonds in the open market.

Question

Figure 11-1 
-Refer to Figure 11-1. If the Fed wants to achieve the results shown in Panel (b), it should
A) lower the discount rate. 
B) decrease margin requirements. 
C) decrease reserve requirements. 
D) sell government bonds in the open market.

Quizplus · Accepted Answer

Selling government bonds in the open market decreases the money supply, which can lead to higher interest rates and reduced investment, achieving the results shown in Panel (b).

Figure 11-1 -Refer to Figure 11-1. If the Fed Wants to Achieve