If the Fed initiates a program to purchase long-term Treasury securities, it is most likely attempting to
A)reduce the rate on short-term Treasury securities.
B)reduce the rate on commercial paper.
C)reduce inflation.
D)reduce long-term interest rates.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys long-term Treasury securities, it increases demand for those securities, which typically raises their prices. Since bond prices and yields move inversely, this action lowers long-term interest rates. This is part of the Fed's monetary policy tools to stimulate economic growth by making borrowing cheaper.

If the Fed Initiates a Program to Purchase Long-Term Treasury