If the Fed Expands the Money Supply by $1 Trillion

question 197

Multiple Choice

If the Fed expands the money supply by $1 trillion, what will happen in the money market?

• A) The equilibrium interest rate will rise, and less money will be exchanged in equilibrium.
• B) The equilibrium interest rate will fall, and more money will exchanged in equilibrium.
• C) The equilibrium interest rate will not change.
• D) None of the above.

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Definitions:

Simplify

Simplifying a mathematical expression or problem means breaking it down to its most basic form to make it simpler to understand or resolve.

Operation Indicated

The specific mathematical procedure or action suggested by a problem or equation.

Collect Like Terms

In algebra, to combine terms that have the same variables raised to the same power.

Simplify

To make (something) simpler or easier to understand or do.