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Example Questions
Example Question #1 : Money Supply
Which of the following are considered open-market activities?
Possible Answers:
Selling Government Bonds
Raising Bank Reserve Requirements
Decreasing Taxes
None of these would be considered Open Market Activities
Increasing Government Spending
Correct answer:
Selling Government Bonds
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.)
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