- Which of the following results when the Federal Reserve sells bonds to commercial banks?
(A) The total assets held by commercial banks
will eventually increase.
(B) The money supply decreases.
(C) The discount rate increases.
(D) The public increases its cash holdings.
(E) The required reserve ratio increases because
of decreasing excess reserves.

Consider an economy where the government's budget is initially balanced. the production function, consumption function and investment function can be represented as follows y equals k to the power of alpha l to the power of 1 minus alpha end exponent c equals c subscript 0 plus b left parenthesis y minus t right parenthesis i equals i subscript 0 minus d r suppose that taxes increase. what happens to the equilibrium level of output?