In the Context of Open Market Operations, When Inflation Is

Multiple Choice

In the context of open market operations, when inflation is a concern, the Fed sells securities to buyers who write checks to the Fed to pay for securities they bought, and the Fed withdraws these funds from banks. With fewer funds, _____.

A) credit becomes tighter
B) banks increase the number of loans they make
C) the money supply increases
D) the inflationary pressures in the economy heat up