Suppose the Fed Conducts an Open Market Purchase

question 37

Multiple Choice

Suppose the Fed conducts an open market purchase. We can expect this transaction to

• A) reduce the money supply, increase bond prices, and lower interest rates.
• B) increase the money supply, lower bond prices, and lower interest rates.
• C) increase the money supply, raise bond prices, and lower interest rates.
• D) reduce the money supply, reduce bond prices, and increase interest rates.

---

Definitions:

Federal Law

Laws passed by the United States Congress and signed by the President. Federal laws apply throughout the country, overriding state laws where conflicts occur.

Domestic Corporations

Companies that are incorporated (i.e., formed under the corporate laws) in and operate within the country in which they were founded.

Board of Directors

A group of individuals elected to represent shareholders and govern the affairs of a corporation.

Finalize Deal

To complete the negotiations and formal agreements of a business transaction, making it official and binding.