If the Federal Reserve conducts an open market sale, the
A) interest rate will not change.
B) interest rate will increase.
C) interest rate will decrease.
D) money supply is increased.

Question

Quizplus · Accepted Answer

When the Federal Reserve conducts an open market sale, it means they are selling government securities to banks and other financial institutions. This results in a decrease in the reserves held by these institutions, which means they have less money to lend out. As a result, the interest rate goes up as the demand for borrowing money increases.

If the Federal Reserve Conducts an Open Market Sale, the