When the Federal Reserve fights inflation via open market operations, the supply of reserves curve shifts ________ and the supply of money curve shifts ________.

Question

Quizplus · Accepted Answer

When the Federal Reserve fights inflation via open market operations, it sells government securities, which decreases the reserves in the banking system, shifting the supply of reserves curve leftward. This action also decreases the money supply, shifting the supply of money curve leftward.

When the Federal Reserve Fights Inflation Via Open Market Operations