If the interest rate is below a central bank's target, what should the central bank do?
A) buy bonds to increase the money supply
B) buy bonds to decrease the money supply
C) sell bonds to increase the money supply
D) sell bonds to decrease the money supply

Question

Quizplus · Accepted Answer

When a central bank wants to increase the interest rate to its target level, it sells bonds. This action decreases the money supply in the economy, which in turn increases the interest rate.

If the Interest Rate Is Below a Central Bank's Target