If the Fed wishes to increase nominal interest rates, it must engage in an open market ________ of bonds that ________ the money supply.
A)sale; increases
B)sale; decreases
C)sale; does not change
D)purchase; increases

Question

Quizplus · Accepted Answer

When the Fed sells bonds in the open market, it gives up bonds in exchange for cash. This decreases the money supply and increases nominal interest rates.

If the Fed Wishes to Increase Nominal Interest Rates, It