Question

If the Fed begins to sell treasury bills to counter inflation, we would expect to see

an increase in the demand for money.
a decrease in the demand for money.
an increase in the quantity of money demanded.
a decrease in the quantity demanded of money.

If the Federal Reserve sells securities on the open market, how are the purchases of U.S. financial assets by foreigners and the international value of the dollar impacted?

Financial Assets / International Value of Dollar

Increase / Increase
Increase / Decrease
No Change / Decrease
Decrease / Decrease
Decrease / Increase

Answer 1

1. The correct answer is this: AN INCREASE IN THE DEMAND FOR MONEY.
The federal reserve has many tools, which it uses to control the amount of money in the economy and one of them is treasury bill. When the federal reserve sell treasury bill, it reduces the amount of money supply in the economy and it increases the demand for money.
2. The correct option is DECREASE / INCREASE/
If the federal reserve sell securities in the open market and it is bought by foreigners, the US financial assets will decrease while the international value of dollar will increase.