During World War II,whenever interest rates would rise and the price of bonds would begin to fall,the Fed would
A)lower reserve requirements.
B)raise reserve requirements.
C)make open market purchases of government securities.
D)make open market sales of government securities.

Question

Quizplus · Accepted Answer

When interest rates rise and the price of bonds falls, it indicates a decrease in demand for bonds. The Fed can counteract this by making open market purchases of government securities, which increases demand for bonds and lowers interest rates. This action also injects more money into the economy, which can stimulate economic activity. Lowering or raising reserve requirements would not directly address the decrease in demand for bonds. Making open market sales of government securities would exacerbate the decrease in demand for bonds and cause interest rates to rise even further.

During World War II,whenever Interest Rates Would Rise and the Price