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When the Federal Reserve conducts Open Market Sales, it - raises the effective federal funds rate...

When the Federal Reserve conducts Open Market Sales, it

- raises the effective federal funds rate

- lowers the effective federal funds rate

- lowers the effective discount rate

-raises the effective discount rate.

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Answer #1

Since When the Federal Reserve conducts Open Market Sales, then the money supply decreases and so the money supply curve shifts leftward.

Hence interest rate increases, so the demand for loan decreases and so the demand for money. Hence inflation rate decreases and effective federal fund rate also increases.

Hence it can be said that When the Federal Reserve conducts Open Market Sales, it raises the effective federal funds rate.

Hence option first is the correct answer.

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