When the money market is drawn with the value of money on the vertical axis, if the Federal Reserve sells bonds, then the money supply curve
A)shifts rightward, causing the value of money measured in terms of goods and services to rise.
B)shifts rightward, causing the value of money measured in terms of goods and services to fall.
C)shifts leftward, causing the value of money measured in terms of goods and services to rise.
D)shifts leftward, causing the value of money measured in terms of goods and services to fall.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells bonds, it decreases the money supply, shifting the money supply curve leftward. This reduction in money supply increases the value of money, as there is less money available relative to goods and services.

When the Money Market Is Drawn with the Value of Money