Use the following to answer questions .
Exhibit: The Bond Market
-(Exhibit: The Bond Market) If the Fed wants to achieve the results shown in Panel (b), it should
A) lower the discount rate.
B) decrease margin requirements.
C) decrease reserve requirements.
D) sell government bonds in the open market.

Question

Use the following to answer questions .
Exhibit: The Bond Market 
-(Exhibit: The Bond Market) If the Fed wants to achieve the results shown in Panel (b), it should
A) lower the discount rate. 
B) decrease margin requirements. 
C) decrease reserve requirements. 
D) sell government bonds in the open market.

Quizplus · Accepted Answer

Selling government bonds in the open market decreases the money supply, leading to higher interest rates, which is the result shown in Panel (b).

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