Suppose that when the fed decreases the money supply, households and firms initially hold less money than they want to, relative to other financial assets. as a result, households and firms will treasury bills and other financial assets, thereby their prices, and their interest rates. a. sell; decreasing; increasing b. sell; increasing; decreasing c. buy; increasing; decreasing d. buy; decreasing; decreasing

The correct answer is A

Explanation:

When Fed decreases the money supply in the market, then there prevails the shortage of the money at the prevailing rate of interest. So, the interest rate need to be increased in order to dissuade people from holding the money. Therefore, the households and the firms will sell the treasury bills and other kind of financial assets by decreasing the prices and which lead to increase in the interest rate.