Figure 14.4
-Refer to Figure 14.4. If the Fed wants to raise the economy's market interest rate from 6 percent to 8 percent, it needs to _______.

Question

Quizplus · Accepted Answer

The Fed can increase the market interest rate by selling government bonds, which decreases the money supply and increases the demand for money, leading to higher interest rates. Therefore, option C is the correct answer. Option A is incorrect because increasing the money supply would lead to lower interest rates. Option B is incorrect because keeping everything constant would not allow the Fed to achieve its goal. Option D is also incorrect because buying government bonds would increase the money supply and lower interest rates.

Figure 14.4 -Refer to Figure 14.4. If the Fed Wants to Raise