question archive When the Fed conducts open market purchases, a
When the Fed conducts open market purchases, a
Subject:EconomicsPrice:2.88 Bought3
When the Fed conducts open market purchases,
a. it buys Treasury securities, which increases the money supply.
b. it buys Treasury securities, which decreases the money supply.
c. it sells Treasury securities, which decreases the money supply.
d. it sells Treasury securities, which decreases the money supply.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Option a. it buys Treasury securities, which increases the money supply is correct
This option is correct because in the case of open market purchase of treasury securities, the money supply increases. It shifts the LM curve downward that decreases the rate of interest and as the rate of interest decreases then investment increases. It affects the aggregate demand curve directly.
