When the Fed buys Treasury bills as a means of increasing the money supply, it places ____ pressure on their prices and ____ pressure on their yields.
A)upward; upward
B)downward; downward
C)upward; downward
D)downward; upward

Question

Quizplus · Accepted Answer

When the Fed buys Treasury bills, it increases demand for them, which pushes their prices up. Since the yield (interest rate) of a bond moves inversely to its price, yields go down.

When the Fed Buys Treasury Bills as a Means of Increasing