According to the Keynesian transmission mechanism,if the Fed conducts an open market sale of government securities,it may cause which of the following in the investment goods market?
A) a rightward shift in the investment demand curve
B) a leftward shift in the investment demand curve
C) a movement down and along a given investment demand curve
D) a movement up and along a given investment demand curve

Question

Quizplus · Accepted Answer

An open market sale by the Fed decreases the money supply, leading to higher interest rates, which causes a movement up along the investment demand curve as the cost of borrowing increases, reducing investment.

According to the Keynesian Transmission Mechanism,if the Fed Conducts an Open