Suppose the Fed conducts an open market sale of bonds. This monetary policy action will tend to cause

Question

Quizplus · Accepted Answer

When the Fed conducts an open market sale of bonds, it means they are selling bonds to the market. There will be an increase in supply of bonds and decrease in demand for bonds, which will lower the price of bonds. As the price of bonds decreases, the interest rate will increase since there is an inverse relationship between bond prices and interest rates.

Suppose the Fed Conducts an Open Market Sale of Bonds