When the central bank has lowered or raised interest rates, this occurs only because the central bank's bond traders are
A)conducting open market operations to ensure revenue is generated.
B)conducting open market operations to cover their positions.
C)conducting open market operations to ensure that the money supply is increased.
D)conducting open market operations to ensure that the equilibrium interest rate equals x percent.

Question

Quizplus · Accepted Answer

The central bank conducts open market operations to ensure that the equilibrium interest rate equals x percent. This means that the central bank is trying to influence the interest rates in the economy by buying or selling government bonds, and this is done to achieve a particular target interest rate. This target interest rate is based on the central bank's assessment of the state of the economy, and is intended to promote economic stability and growth.

When the Central Bank Has Lowered or Raised Interest Rates