[kipin]

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You answered 47 out of 60 correctly — 78.33 %

I have a B.A. in economics, that's definitely what a public good is.

BUT... question 58, a fellow econ grad needs to help me out.

What is a major effect of a purchase of bonds by the Federal Reserve?
A. A reduction in the supply of common stock.
B. An increase in the volume of commercial bank loans.
C. A decrease in the supply of money.
D. An increase in interest rates.
E. A decrease in investment spending by businesses.

Purchase of bonds by Fed = increase in money supply = increase in interest rates, no? So I thought D.

Furthermore, B C & E all seem consistent with a LOWER interest rate. Yet the answer is B? I'm so confused!

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It is B.

The government buying treasury bills increases the money supply which makes more funds available for loans thus increasing the amount of loans.