When a central bank conducts open market operations by selling government bonds, it primarily aims to _____ the money supply and _____ interest rates, which in turn affects aggregate demand.

When a central bank sells government bonds, it is trying to reduce the amount of money available in the economy. By selling these bonds, people and banks pay money to buy them, which takes cash out of circulation. With less money available, interest rates tend to go up because there is less cash for banks to lend. Higher interest rates can make borrowing more expensive, which usually leads to people and businesses spending less. For example, if a bank raises its interest rates on loans, a person may decide not to take out a loan to buy a new car, which decreases overall spending in the economy.