What happens when the Fed sells more bonds to the public? A) The mone

QUESTION

What happens when the Fed sells more bonds to the public?

A) The money it takes in payment is withdrawn from circulation.
B) The money supply increases.
C) Government spending increases.
D) The discount rate adjusts.
E) Banks must put more of their money into the Fed.

ANSWER

Answer: A
Explanation: A) When the Fed sells more bonds to the public, the money it takes in payment is withdrawn from circulation, which decreases the money supply.