The central bank of Cobra sells securities in an open market operation. In the short run, aggregate demand ________, real GDP ________, and the price level ________.

Question

Quizplus · Accepted Answer

When the central bank sells securities in an open market operation, it effectively reduces the money supply in the economy. This leads to higher interest rates, which in turn reduces investment and spending. Consequently, aggregate demand decreases, leading to a decrease in real GDP and a fall in the price level in the short run.

The Central Bank of Cobra Sells Securities in an Open