If the Fed Buys Government Bonds in the Open Market

Multiple Choice

If the Fed buys government bonds in the open market,

A) interest rates will rise and investment spending will decrease.
B) interest rates and investment spending will remain unchanged but inflation will increase.
C) interest rates will fall and investment spending will increase.
D) banks' excess reserves will be reduced and loans will be called in,leading to an increase in bankruptcies.
E) interest rates will fall and investment spending will decrease.