If a central bank wants to implement a contractionary policy that decreases real GDP, it conducts an open market operation by ________ securities. Bank reserves ________ and the supply of loanable funds ________. The quantity of money ________.
A)selling; decrease; decreases; decreases
B)purchasing; decrease; decreases; decreases
C)purchasing; decrease; increases; decreases
D)selling; increase; increases; increases
E)purchasing; increase; increases; increases

Question

Quizplus · Accepted Answer

When a central bank sells securities, it takes money out of circulation, decreasing bank reserves, reducing the supply of loanable funds, and decreasing the quantity of money.

If a Central Bank Wants to Implement a Contractionary Policy