When the Federal Reserve sells securities on the open market it drives bond prices ____ and drives interest rates ___.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells securities on the open market, it increases the supply of bonds, which lowers their price. When bond prices fall, interest rates rise, because the yield on the bonds will need to increase to attract buyers. Therefore, the correct choice is D: down; up.

When the Federal Reserve Sells Securities on the Open Market