When the Fed changes money supply by selling government securities,the interest rate will

Question

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When the Fed changes the money supply by selling government securities, it reduces the monetary base, which eventually leads to an increase in the interest rate. The magnitude of the interest rate change depends on the slope of the LM curve. If the LM curve is vertical or upward sloping, even a small decrease in money supply can lead to a significant increase in the interest rate. Therefore, the interest rate will rise if the LM curve is vertical or upward sloping. If the LM curve is horizontal, the interest rate will not change because the demand for money is infinitely elastic at the equilibrium point.

When the Fed Changes Money Supply by Selling Government Securities,the