What is the likely effect of a central bank engaging in open market operations to sell government securities? A. It will increase the money supply in the economy. B. It will decrease the money supply in the economy. C. It will have no effect on the money supply but will increase interest rates. D. It will increase the money supply and decrease interest rates.

What is the likely effect of a central bank engaging in open market operations to sell government securities? A. It will increase the money supply in the economy. B. It will decrease the money supply in the economy. C. It will have no effect on the money supply but will increase interest rates. D. It will increase the money supply and decrease interest rates.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter28: Monetary Policy And Bank Regulation

Section: Chapter Questions

Problem 11RQ: List the three traditional tools that a central bank has for controlling the money supply.

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Similar questions

List the three traditional tools that a central bank has for controlling the money supply.
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Suppose the central bank is following a constantmoney-growth-rate rule and the economy is hit witha severe economic downturn. Use an aggregate supply and demand graph to show the possible effects onthe economy. How does this situation reflect on thecredibility of the central bank if it maintains the moneygrowth rule? How does it reflect on the central bank’scredibility if it abandons the money growth rule torespond to the downturn?
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