In: Economics
When the Fed makes an open market purchase of government securities—Treasury Bills, TBs; Treasury Notes, TNs; Treasury Bonds, TBNs--, the official money supply or M2 shall:
Group of answer choices
a. All of the above
b. Decrease
c. Increase
d. Remain unchanged
The answer is (c) increase
Open market purchase is an expansionary monetary policy and it will lead to an increase in the money supply in general and the specific component M2.