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Suppose the Federal Reserve announces plans to buy back $85 billion of bonds. Assuming the announcement was not expected, what effect, other things held constant,
Suppose the Federal Reserve announces plans to buy back $85 billion of bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates?
a. Prices and interest rates would both rise.
b. Prices would rise and interest rates would decline.
c. Prices and interest rates would both decline.
d. There would be no changes in price or interest rates.
e. Prices would decline and interest rates would rise.
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