Question

choose the best response for each of the following statements. a. when the federal reserve makes an open market purchase, the fedmultiple choice 1sells bonds to the public, which decreases the money supply.buys bonds from the public, which decreases the money supply.buys bonds from the public, which increases the money supply.sells bonds to the public, which increases the money supply. b. if the fed wants to increase interest rates, it should make an open market purchase . this would decrease the money supply and achieve the increase in interest rates.

Answer 1

a. In the case when the federal reserve would make an open market purchase so this means that the bonds are purchased from the public and due to this it rises the money supply

b. In the case when the fed wants to rise the rate of interest it should make the open market sale due to this it decreases the money supply and the rate of interest would be increased

This is the impact when the transaction could take place :