If a central bank sells government securities as part of implementing monetary policy:
A) the liquidity in the financial system will increase.
B) interest rates are likely to increase.
C) spending in the economy is likely to increase.
D) the price of the currency is likely to depreciate.

Question

Quizplus · Accepted Answer

Selling government securities reduces the amount of reserves in the banking system, which makes it more expensive for banks to borrow money. This leads to an increase in interest rates.

If a Central Bank Sells Government Securities as Part of Implementing