Using the money demand and money supply model,an open market sale of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to
A)increase.
B)decrease.
C)not change.
D)increase,then decrease.

Question

Quizplus · Accepted Answer

An open market sale of Treasury securities by the Federal Reserve leads to a decrease in the money supply, as the reserves of commercial banks decrease. The decrease in the money supply increases the demand for money, leading to an upward shift in the money demand curve. As a result, the equilibrium interest rate will increase.

Using the Money Demand and Money Supply Model,an Open Market