Which of the following is TRUE when the central bank buys bonds? Money supply decreases Money...

Which of the following is TRUE when the central bank buys bonds?

Money supply decreases
Money supply increases
Interest rates increase
Money multiplier increases

Solutions

Expert Solution

When Central Bank buys Bond for government securities and it comes under the expansionary monetary policy in which the goal is to increase the money supply by lowering the interest rate

opposite to it is contractionary monetary policy in which the goal is to decrease the money supply

The correct answer is option B

Rahul Sunny answered 1 year ago

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