If the Fed wants to raise the interest rate, in the short run in the money market the Fed
A) decreases the quantity of money.
B) increases the quantity of money.
C) shifts the demand for money curve leftward.
D) shifts the demand for money curve rightward.
E) directly raises the interest rate and does nothing to either the supply of money or the demand for money.

Question

Quizplus · Accepted Answer

If the Fed wants to raise the interest rate, it needs to decrease the quantity of money in the short run. When there is less money in the market, the demand for money stays the same but the supply of money decreases, pushing up the interest rate. This can be accomplished by open market operations, such as selling government bonds, to reduce the amount of money available.

If the Fed Wants to Raise the Interest Rate, in the Short