All else being equal,if a central bank sells government bonds from the market it would:
A) decrease interest rates.
B) decrease the money supply.
C) most likely decrease savings in the economy.
D) mean the supply of loanable funds would move to the right.

Question

Quizplus · Accepted Answer

When the central bank sells government bonds from the market, it decreases the money supply as it removes money from circulation. This leads to an increase in interest rates as there is less money available for lending. It may indirectly affect savings in the economy, but the primary impact is on the money supply. The supply of loanable funds would not move to the right as the central bank is reducing the amount of money available for borrowing.

All Else Being Equal,if a Central Bank Sells Government Bonds