"When the Fed Buys Securities from a Bank, the Quantity

question 447

Essay

"When the Fed buys securities from a bank, the quantity of money eventually decreases by a fraction of the initial change in the monetary base." Is the previous statement correct or incorrect? Explain your answer.

---

Definitions:

External Validity

The extent to which the results of a study can be generalized or applied to other settings, populations, or times.

Internal Validity

The extent to which a study is able to produce evidence that its results are caused by the variables it is testing, free from external influence.

Correlational Method

A statistical technique used to determine the degree to which two variables are related without inferring a cause-and-effect relationship.

Confounding Variable

An extraneous variable in an experimental design that correlates with both the dependent and independent variables, potentially leading to a false assumption of causality.