The standard discussion of monetary policy is based on the assumption that the:
A)entire yield curve shifts up when the Fed sells government bonds.
B)entire yield curve shifts down when the Fed sells government bonds.
C)yield curve becomes inverted when the Fed buys government bonds.
D)yield curve becomes steeper when the Fed buys government bonds.

Question

Quizplus · Accepted Answer

When the Fed sells government bonds, it decreases the money supply, leading to higher interest rates across different maturities, causing the entire yield curve to shift up.

The Standard Discussion of Monetary Policy Is Based on the Assumption