With the case of an open-market sale of securities by the central bank, we should most...
With the case of an open-market sale of securities by the central bank, we should most likely expect (ceteris paribus)
a. an excess demand for bonds.
b. increase in the level of GDP.
c. monetary stimulus for the domestic economy.
d. depreciation of the currency in foreign exchange.
e. higher rates of inflation.
Homework Answers
a. an excess demand for bonds.
(An open market sale leads to a decrease in money supply in the economy. So, interest rate increases which means quantity demanded decreases. Thus, demand for bonds increase. So, there is excess demand for bonds.)
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