A decision on the part of the FOMC to lower interest rates must necessarily be followed by
A) Fed open market purchases, which lower the money supply and reduce interest rates.
B) Fed open market purchases, which increase the money supply and reduce interest rates.
C) Fed open market sales, which lower the money supply and reduce interest rates.
D) Fed open market sales, which increase the money supply and reduce interest rates.
E) Fed open market purchases, which increase the money supply and increase interest rates.

Question

Quizplus · Accepted Answer

To lower interest rates, the Federal Open Market Committee (FOMC) would engage in open market purchases. This action increases the money supply in the economy, which in turn reduces interest rates.

A Decision on the Part of the FOMC to Lower