A central bank decides to sell government bonds in an effort to control inflation. How would this action most likely impact the short-term interest rates and overall economic activity?

When a central bank sells government bonds, it is taking money out of circulation. Investors buy these bonds, which means they pay cash for them, reducing the amount of money available in the economy. With less money available, banks have less to lend, which usually causes short-term interest rates to rise. Higher interest rates can make borrowing more expensive for consumers and businesses, leading to a slowdown in spending and investment. For example, if a small business wants to take out a loan to expand, the higher interest rates might discourage them from doing so, ultimately slowing down economic activity.