E (If the central bank has decided that moving to full employment requires an increase in the federal funds rate, it must sell bonds to decrease the money supply. The resulting increase in interest rates decreases AD and puts downward pressure on the price level.)
To move the economy closer to full employment, the central bank decides that the federal funds rate must be increases. The appropriate open market operation is to ___________, which _________ the money supply, ____________ aggregate demand, and fight __________.
A. Buy bonds, Increases, Increase, Unemployment
B. Buy bonds, Increases, Increase, Inflation
C. Sell bonds, Decreases, Decrease, Unemployment
D. Sell bonds, Decreases, Increase, Inflation
E. Sell bonds, Decreases, Decrease, Inflation