Question

If the Federal Reserve sells $60,000 in Treasury bonds to a bank at 4% interest, what is the immediate effect on the money supply?

Answer 1

It is decreased by $60,000. Hope that helps Apex User

Answer 2

Answer:

the money supply will decrease by $60,000

Explanation:

When the FED sells securities, it is carrying out a contractionary monetary policy, which will decrease the money supply and increase the interest rates. Contractionary monetary policies are used to lower the inflation rate.