Asked by Giovanni Montano on Jul 07, 2024
Verified
If it is observed that interest rates have been rising over a period of time,this could mean that the Fed has
A) increased the money supply.
B) decreased the required reserve to deposit ratio.
C) decreased the discount rate.
D) sold government securities.
Interest Rates
The cost of borrowing money, typically expressed as a percentage, which influences economic activity by encouraging or discouraging spending and investment.
Government Securities
financial instruments issued by the government to finance its fiscal deficits, including bonds, bills, and notes, which are considered safe investments.
- Study how transactions involving government securities influence the money supply and interest rates.
Verified Answer
CI
Chadrick IngramJul 13, 2024
Final Answer :
D
Explanation :
When the Fed sells government securities, it reduces the money supply in the economy, which leads to an increase in interest rates. Therefore, if interest rates have been rising over a period of time, it is likely that the Fed has been selling government securities.
Learning Objectives
- Study how transactions involving government securities influence the money supply and interest rates.