When the Fed Purchases More Bonds And, Thereby, Increases the Money

question 165

Multiple Choice

When the Fed purchases more bonds and, thereby, increases the money supply, the initial effects of the more expansionary monetary policy will often be weakened as a result of

• A)lower nominal interest rates and a decline in the velocity of money.
• B)higher nominal interest rates and a decline in the velocity of money.
• C)higher nominal interest rates and an increase in the velocity of money.
• D)lower real interest rates and an increase in the velocity of money.

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