Refer to Figure 16.2.
-Refer to Figure 16.2.The sale of bonds by the Fed in the open market will result in:

Name: Refer to Figure 16.2. -Refer to Figure 16.2.The sale of bonds by the Fed in the open market will result in:
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Question

Refer to Figure 16.2. 
-Refer to Figure 16.2.The sale of bonds by the Fed in the open market will result in:

Quizplus · Accepted Answer

When the Fed sells bonds in the open market, it is essentially taking money out of circulation. This leads to a decrease in the money supply, which is reflected in a shift from AD₂ to AD₁, as shown in the diagram. Choice A is therefore the correct answer.