To stabilize interest rates,the Federal Reserve will respond to an increase in money demand by
A)buying government bonds,which decreases the supply of money.
B)selling government bonds,which increases the supply of money.
C)buying government bonds,which increases the supply of money.
D)selling government bonds,which decreases the supply of money.

Question

Quizplus · Accepted Answer

When the Federal Reserve buys government bonds, it increases the supply of money, which helps stabilize interest rates by accommodating the increased demand for money.

To Stabilize Interest Rates,the Federal Reserve Will Respond to an Increase