Refer to the figure below where the nominal interest rate equals 6% and the money supply equals 600. If the Federal Reserve wants to set the nominal interest rate at 10%, it must conduct open market _____ to set the money supply at _____.

Question

Quizplus · Accepted Answer

The nominal interest rate is determined by the intersection of the money supply and money demand curves. If the Fed wants the interest rate to be 10%, it must sell interest-bearing securities to decrease the money supply to 200.

Refer to the Figure Below Where the Nominal Interest Rate