If the Federal Reserve uses open-market operations to lower the interest rates on short-term U.S. government bonds, then as a consequence asset prices:

Question

Quizplus · Accepted Answer

When the interest rates on short-term U.S. government bonds decrease, investors tend to shift their funds towards other assets such as stocks and real estate, leading to an increase in asset prices. However, the decrease in interest rates also leads to a decrease in the average expected rate of return on assets. Therefore, option A is the correct answer.

If the Federal Reserve Uses Open-Market Operations to Lower the Interest