When conducting an open-market sale,the Fed
A)buys government bonds,and in so doing increases the money supply.
B)buys government bonds,and in so doing decreases the money supply.
C)sells government bonds,and in so doing increases the money supply.
D)sells government bonds,and in so doing decreases the money supply.

Question

Quizplus · Accepted Answer

When the Fed conducts an open-market sale, it sells government bonds to the public in exchange for cash, which reduces the amount of money in circulation and hence, decreases the money supply. Hence, option D is correct.

When Conducting an Open-Market Sale,the Fed