If the Fed Makes Open Market Purchases of Bonds

question 244

Multiple Choice

If the Fed makes open market purchases of bonds,

• A) the money supply increases by more than the amount of bonds purchased.
• B) the money supply increases by less than the amount of bonds purchased.
• C) the money supply decreases by more than the amount of bonds purchased.
• D) the money supply decreases by less than the amount of bonds purchased.

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Definitions:

Factors of Production

The resources utilized in the production of goods and services, traditionally categorized into land, labor, and capital.

Circular-Flow Model

A model that illustrates the movement of resources and money between firms and households in an economy.

Capital

Wealth in the form of money or other assets owned or employed in business by an individual, firm, or country.

Wages and Income

Represents the earnings received by laborers for their work and can include salaries, wages, and other forms of compensation.