Suppose the Fed Sells Government Bonds

question 93

Short Answer

Suppose the Fed sells government bonds. Use a graph of the money market to show what this does to the value of money.

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Definitions:

Nominal Risk-free Rate

The interest rate on a risk-free security that does not account for inflation.

Purchasing Power Parity

An economic theory that states that the exchange rate between two currencies is equal to the ratio of the currencies' respective purchasing power.

Relative Purchasing

The comparison of the purchasing power of various currencies against goods and services, adjusting for their price differences in different countries.

Export Development Canada

A Canadian government agency that provides financing, insurance, and other support to Canadian exporters and investors.