A purchase of Treasury securities by the Fed leads to a(n)____ in interest rates and a(n)____ in the level of business investment.
A)increase; decrease
B)decrease; decrease
C)increase; increase
D)decrease; increase

Question

Quizplus · Accepted Answer

When the Fed purchases Treasury securities, it injects liquidity into the banking system, which typically leads to lower interest rates. Lower interest rates, in turn, make borrowing cheaper for businesses, likely leading to an increase in business investment.

A Purchase of Treasury Securities by the Fed Leads to A(n)____