When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,
A)those assets are government bonds and the Fed's reason for selling them is to increase the money supply.
B)those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.
C)those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply.
D)those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.

Question

Quizplus · Accepted Answer

When the Federal Reserve sells assets from its portfolio, the assets are usually government bonds. The Fed's reason for selling them is to decrease the money supply, as selling bonds reduces the amount of money in circulation. This action is often taken to combat inflation by reducing the availability of funds for spending and investment.

When the Federal Reserve Sells Assets from Its Portfolio to the Public