When the Fed Sells Bonds and Drains Reserves from the Banking

question 70

Multiple Choice

When the Fed sells bonds and drains reserves from the banking system, thereby reducing the supply of money, this policy will

• A) decrease short-term interest rates to a greater degree than long-term interest rates.
• B) decrease long-term interest rates to a greater degree than short-term interest rates.
• C) increase short-term interest rates to a greater degree than long-term interest rates.
• D) increase long-term interest rates to a greater degree than short-term interest rates.

---

Definitions:

Observable Behavior

Actions or reactions of an individual that can be directly seen and measured.

American Psychologists

Professionals based in the United States specializing in the study of cognitive, emotional, and social processes and behavior by observing, interpreting, and recording how individuals relate to one another and their environments.

John B. Watson

An American psychologist who is considered one of the founders of behaviorism, emphasizing the importance of observable behaviors over internal states.

Introspective Study

A research approach focusing on the examination of one's own thoughts and feelings.