Which of the following options would be most likely to cause an increase in short-term real interest rates?
A) The Federal Reserve cuts the discount rate.
B) The Federal Reserve lowers the reserve requirement.
C) The Federal Reserve sells bonds in the open market.
D) The federal budget is shifted toward a surplus.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells bonds in the open market, it decreases the money supply and increases the demand for money, resulting in an increase in short-term real interest rates. A, B, and D would have the opposite effect and lower short-term real interest rates.

Which of the Following Options Would Be Most Likely to Cause