When the Fed sells bonds in the open market,interest rates _______ and aggregate demand shifts to the ______.
A) Rise;left
B) Rise;right
C) Fall;left
D) Fall;right

Question

Quizplus · Accepted Answer

When the Fed sells bonds in the open market, it decreases the money supply, leading to an increase in interest rates. Higher interest rates decrease aggregate demand because they raise the cost of borrowing and decrease the willingness of consumers and firms to spend and invest. As a result, aggregate demand shifts to the left.

When the Fed Sells Bonds in the Open Market,interest Rates