Which of the following statements is true?
A)If the Fed wants to decrease money supply, it sells government securities.
B)If the Fed wants to increase money supply, it sells government securities.
C)If the Fed wants to decrease money demand, it sells government securities.
D)If the Fed wants to increase money demand, it sells government securities.

Question

Quizplus · Accepted Answer

When the Fed sells government securities, it decreases the money supply because it reduces the amount of money in circulation. This is done to combat inflation and maintain overall economic stability. Therefore, statement A is true. Statement B is false because if the Fed wants to increase money supply, it would buy government securities, not sell them. Statements C and D are also false because selling government securities does not directly affect money demand.

Which of the Following Statements Is True