When the Fed makes an open market sale of government securities, or sale of treasuries (TBs,...

When the Fed makes an open market sale of government securities, or sale of treasuries (TBs, TNs,…), M2 shall:

Group of answer choices

a. Decrease

b. Remain unchanged

c. None of the above

d. Increase

e. All of the above

Solutions

Expert Solution

Answer : The answer is option b.

M2 does not include securities or treasuries. Only M4 include securities or treasuries. Hence if Fed sell government securities or treasuries then it does not impact the M2. So, M2 will remain unchanged. For this reason except option b other options are not correct. Therefore, option b is the correct answer.

Rahul Sunny answered 1 year ago

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