If the Fed sells government securities to banks,eventually we expect
A)the price level to increase
B)planned investment expenditures to increase
C)aggregate demand to increase
D)short-run aggregate supply to increase
E)interest rates to increase

Question

Quizplus · Accepted Answer

When the Fed sells government securities to banks, it decreases the reserves of banks, thus increasing the competition for loans and raising interest rates. Therefore, we can expect interest rates to increase as a result of this action.

If the Fed Sells Government Securities to Banks,eventually We Expect