Refer to the given figure. If the Federal Reserve wants to set the nominal interest rate at 9 percent, it must conduct open market ________ to set the money supply at ________.
A)purchases; 100
B)sales; 100
C)purchases; 900
D)sales; 900

Question

Refer to the given figure.  If the Federal Reserve wants to set the nominal interest rate at 9 percent, it must conduct open market ________ to set the money supply at ________.
A)purchases; 100 
B)sales; 100 
C)purchases; 900 
D)sales; 900

Quizplus · Accepted Answer

The nominal interest rate is determined by the intersection of the money supply and money demand curves. If the Fed wants the interest rate to be 9 percent, it must sell securities to decrease the money supply to 100.

Refer to the Given Figure