How to find the effect of government securities on money supply

Help Questions

AP Macroeconomics › How to find the effect of government securities on money supply

Questions 1 - 1
1

Which of the following are considered open-market activities?

Selling Government Bonds

Decreasing Taxes

Increasing Government Spending

Raising Bank Reserve Requirements

None of these would be considered Open Market Activities

Explanation

Selling Government Bonds would be considered open market activities. When the Federal Reserve wants to adjust interest rates, they conduct open market operations - which involves selling government bonds (which raises interest rates by decreasing the money supply) or buying government bonds (which lowers interest rates by increasing the money supply.)

Return to subject