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Author Question: What happens to the price of bonds when the Fed is selling bonds? What happens to the interest rate? ... (Read 123 times)

jjjetplane

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on: Jun 29, 2018
What happens to the price of bonds when the Fed is selling bonds? What happens to the interest rate? What happens to the money supply?
 
  What will be an ideal response?

Question 2

When money serves as a standard for comparing values of different things, it is functioning as a
 
  A) store of value.
  B) hedge against inflation.
  C) standard of deferred payment.
  D) unit of accounting.


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AISCAMPING

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Reply #1 on: Jun 29, 2018
Answer to Question 1

If the Fed sells bonds, the supply of bonds in the market increases, causing the price of bonds to fall. Since the price of bonds is inversely related to the interest rate, the interest rate increases. The Fed sells bonds to reduce the money supply.

Answer to Question 2

D


jjjetplane

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Reply 2 on: Jun 29, 2018
YES! Correct, THANKS for helping me on my review

AISCAMPING

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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