Question

An open-market sale
a. increases the number of dollars in the hands of the public and decreases the number of bonds in the hands of the public.
b. decreases the number of dollars and the number of bonds in the hands of the public.
c. increases the number of dollars and the number of bonds in the hands of the public.
d. decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Answer 1

Answer:

The answer is: D) decreases the number of dollars in the hands of the public and increases the number of bonds in the hands of the public.

Explanation:

An open market sale is the selling of government bonds by the Federal Reserve. When the government sells it bonds, it takes the money away form the market (investors, banks, mutual funds, etc.) and exchanges bonds for it. Open market sales reduce the money supply in the economy.