If the Fed sells United States government securities on the open market,this will cause

Question

Quizplus · Accepted Answer

When the Fed sells United States government securities on the open market, it reduces the money supply in the economy. This causes an increase in the interest rate, which discourages borrowing for investment. Therefore, option D is the correct choice. Options A and C are incorrect because they suggest an increase in the money supply, which is the opposite of what happens when the Fed sells securities. Option B is incorrect because it suggests a fall in interest rates, which is also the opposite of what happens in this scenario.

If the Fed Sells United States Government Securities on the Open