The Governing Council has decided that the overnight rate should be 2% rather than the current rate of 1.5%.The appropriate open market action is to _____ Treasury bills to _____ money _____.

Question

Quizplus · Accepted Answer

To raise the overnight rate from 1.5% to 2%, the central bank needs to decrease the supply of money in the market. This can be achieved by selling Treasury bills, which reduces the amount of money available in circulation. Therefore, the appropriate open market action is to sell Treasury bills to decrease the supply of money, which is option B. Options A, C, and D are incorrect as they suggest buying Treasury bills, which would increase the supply of money.

The Governing Council Has Decided That the Overnight Rate Should