question archive An open market purchase of bonds by the Fed a
An open market purchase of bonds by the Fed a
Subject:EconomicsPrice:2.88 Bought3
An open market purchase of bonds by the Fed
a. will shift the money supply curve to the left.
b. will drain reserves from the banking system and shift the money supply curve to the right.
c. will inject reserves into the banking system and shift the money supply curve to the left.
d. will shift the money supply curve to the right.
e. will change the slope of the money supply curve.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
The correct option is d. will shift the money supply curve to the right.
Explanation:
Open market operation is one of the types of monetary policy implemented by the Fed. When the Fed purchases bonds, it tries to increase the money supply by giving money to the bond's financial institutions and sellers. Increased money supply will shift the supply curve to the right.
