When open market operations are used to ____ bank funds, the yield on debt instruments ____.
A) reduce; decreases
B) reduce; increases
C) increase; increases
D) none of the above

Question

Quizplus · Accepted Answer

When open market operations are used to reduce bank funds, the central bank sells securities, which decreases the money supply and increases interest rates, leading to an increase in the yield on debt instruments.

When Open Market Operations Are Used to ____ Bank Funds