Question

Which of the following statements describes the effect of the South African Reserve Bank selling government bonds?

1. The money supply decreases and the interest rate increases.
2. The money supply increases and the interest rate decreases.
3. There is a decrease in equilibrium output in response to the increase in the interest rate.
4.  There is an increase in equilibrium output in response to the decrease in the interest rate.

II) only.

(I) and (III) only.

(II) and (IV) only.

(II) and (III) only.

Answer 1

(I) and (III) only.