If the Fed Sells Bonds in an Open Market Operation,which

question 70

Multiple Choice

If the Fed sells bonds in an open market operation,which of the following is most likely to occur?

• A) The equilibrium level of GDP decreases
• B) The money supply increases
• C) The interest rate falls
• D) The aggregate expenditure line shifts upward
• E) The open market operation is said to be expansionary.

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Definitions:

Promise

A promise or guarantee to take a specific action or ensure a certain outcome.

Order To Pay

A directive, usually legal or financial in nature, mandating that a certain amount of money must be paid.

Drawer

The person who writes or issues a bill of exchange, check, or draft, instructing a drawee to pay a specified sum to a payee.

Drawee

The party in a financial transaction who is directed to pay a certain amount of money, typically written on a draft or check.