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If a Central Bank Wants to Implement a Contraction Open

Question 28

Multiple Choice

If a Central Bank wants to implement a contraction open market policy to reduce the money supply, which of the following statements is false:


A) The Central Bank will sell securities to the non-bank public, which will change the non-bank publics assets by + Securities and - Deposits with Banks.
B) The Central Bank will buy securities from the non-bank public, which will change the non-bank public assets by + Securities and - Deposits with Banks.
C) The supply of loanable funds curve will shift inward intersecting with the demand curve for loanable funds at a higher real equilibrium interest rate.
D) The reduction in non-bank public at banks will reduce deposits held as a liability by banks and reduce deposits available for banks to make loans.

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