Question

The Fed (Federal Reserve) desires to decrease the money supply. It conducts an _____________________ of U.S. government bonds.

Select one:

a. open-market sale

b. open-market purchase

c. none of the above

Answer 1

if it conducts open market purchase what happens is that it will take a bonds and release the money into the economy as a result of which the money supply increases.

That's why (b) is wrong

if it conducts open market sale what happens is that the bonds ful move to the economy and the money in circulation will come back to the Federal Reserve as a result of which the money supply in the economy decreases and that is the reason why

(a) is the answer to this question

Because (a) is the answer

(C) is wrong because none of the above is ruled out