If the Fed sells bonds, the short-run impact of this policy will tend to include:

Question

Quizplus · Accepted Answer

When the Fed sells bonds, it decreases the money supply in the economy. This causes an increase in demand for money, which leads to an increase in the interest rate. Therefore, the short-run impact of this policy will be an increase in real interest rates. This can lead to a decrease in investment and consumption and ultimately lead to lower levels of output and employment.

If the Fed Sells Bonds, the Short-Run Impact of This