When the Fed makes an open market purchase of government securities—Treasury Bills, TBs; Treasury Notes, TNs;...

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

Solutions

Expert Solution

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.

Rahul Sunny answered 1 year ago

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