If the Fed wants to maintain current interest rates, it would be buying government bonds in the open market when:
A) The demand for money decreases
B) The demand for money increases
C) Investment demand decreases
D) The discount rate increases

Question

Quizplus · Accepted Answer

When the demand for money increases, the Fed may buy government bonds to inject liquidity into the economy, thereby maintaining current interest rates by offsetting the upward pressure on rates due to increased money demand.

If the Fed Wants to Maintain Current Interest Rates, It