Figure 11-4 -Refer to Figure 11-4.If the Fed Acts to Close the Acts

Multiple Choice

Figure 11-4

-Refer to Figure 11-4.If the Fed acts to close the output gap in Panel (a) , it would ____ government bonds which will lead to the shift in demand for bonds in Panel (b) .This action will raise the price of bonds and _______ the interest rate.

A) sell; lower
B) buy; increase
C) buy; lower
D) sell; increase