When the Fed conducts an open market sale of government bonds, what does it want to happen to bank lending as a result? A. A decrease in bank lending to decrease the money supply B. An increase in bank lending to increase the money supply C. An increase in bank lending to decrease the money supply D. A decrease in bank lending to increase the money supply What should the Fed do to decrease Aggregate Demand? A. Cut income taxes B. Raises income taxes C. Buy bonds D. Sell Bonds What should the Fed do to increase Aggregate Demand? A. Cut income taxes B. Raise income taxes C. Sell bonds D. Buy bonds When the Fed buys bonds from banks, what happens to interest rates? A. Banks have fewer reserves to lend, so competition among borrowers drives interest rates up B. Banks have fewer reserves to lend, so competition among banks drives interest rates down C. Banks have more reserves to lend, so competition among banks drives interest rates down D. Banks have more reserves to lend, so competition among borrowers drives interest rates up What is the appropriate policy for the Federal Reserve during high inflation? A. Cut taxes B. Buy bonds C. Raise taxes D. Sell bonds When the Fed takes action to reduce the unemployment rate, what effect does that action have on the inflation rate? A. It will have no effect on inflation B. It will cause inflation to go down C. It will cause inflation to go up