If the Federal Reserve sells securities in the open market, the money supply will _____, which leads to _____ in the interest rate.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells securities in the open market, it effectively removes money from the banking system, leading to a decrease in the money supply. This reduction in the money supply tends to increase interest rates because there is less money available for banks to lend, making borrowing more expensive.

If the Federal Reserve Sells Securities in the Open Market