Question

Suppose the Federal Reserve sells Treasury bills. We can expect this transaction to _____ the money supply, _____ Treasury bill prices, and _____ interest rates. a. reduce; increase; lower b. increase; lower; lower c. reduce; reduce; raise d. increase; raise; lower

Answer 1

Answer: C. Reduce; Reduce; Raise

Explanation:

Suppose the Federal Reserve sells Treasury bills. We can expect this transaction to reduce the money supply, reduce Treasury bill prices, and raise interest rates.

If the Federal Reserve sells securities such as treasure bills and bonds to the banks or individuals, it takes money out of the financial system, which increases interest rates, reduces demand for loans, and slows the economy.