1.If the Fed sells government securities, in the short run the nominal interest rate ________ and the real interest rate ________.

Select one:

a.rises; falls

b.rises; rises

c.does not change; rises

d.rises; does not change

e.falls; falls

2.If the Fed sells U.S. government securities to banks, the federal funds rate ________ and banks' reserves ________.

Select one:

a.rises; decrease

b.rises; do not change

c.rises; increase

d.falls; increase

e.falls; decrease