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Dmitriy789 [7]
3 years ago
14

If the Fed engages in an open market sale with a bond dealer, the bond dealer's bank's transactions deposits liabilities will __

______ and the money supply will ________.
a) increase; decrease
b) increase; increase
c) decrease; decrease
d) decrease; increase
Business
1 answer:
Sliva [168]3 years ago
4 0

Answer:

The correct answer is option c.

Explanation:

If the Federal bank sells securities to a bond dealer, the dealer will need to pay back the Fed. This will cause a reduction in the dealer's bank's transaction deposits liabilities.

A reduction in deposits liabilities will further cause a reduction in the total reserves of the bank. Consequently, it will cause a decrease in the money supply. In this way, the federal reserve bank can curb inflationary pressures.

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