In an open market purchase, the Fed ________ government ...

[Bernana]

In an open market purchase, the Fed ________ government securities, which ________ bank reserves and ________ the federal funds rate.
 
  A) sells; increases; lowers
  B) buys; increases; raises
  C) buys; increases; lowers
  D) buys; decreases; raises
  E) sells; decreases; lowers

Question 2

A country initially has an equilibrium real interest rate of 4 percent and an equilibrium quantity of investment of 2 trillion. The government's budget deficit then increases. According to the crowding-out effect, the
 
  A) demand for loanable funds curve shifts rightward, the real interest rate rises, and investment decreases.
  B) supply of loanable funds curve shifts rightward, the real interest rate rises, and investment increases.
  C) supply of loanable funds curve shifts leftward, the real interest rate falls, and investment decreases.
  D) demand for loanable funds curve shifts leftward, the real interest rate falls, and investment increases.
  E) demand for loanable funds curve shifts rightward, the real interest rate falls, and investment increases.

[morrie123456]

Answer to Question 1

C

Answer to Question 2

A

[Bernana]

Thank you

[morrie123456]

Happy to help you