The Fed could sell bonds in the open market in an effort to keep interest rates constant when
A)The discount rate increases.
B)Money demand increases.
C)The reserve requirement increases.
D)Money demand decreases.

Question

Quizplus · Accepted Answer

If money demand decreases, there will be excess supply of money in the market. In order to keep interest rates constant, the Fed could sell bonds in the open market, which would decrease the money supply and increase interest rates.

The Fed Could Sell Bonds in the Open Market in an Effort