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Explain What Happens to the Money Supply When the Fed

question 41

Essay

Explain what happens to the money supply when the Fed sells bonds on the open market. What happens to the assets and liabilities of the Fed?


Definitions:

Quantity

The amount or number of a material or product which is available, produced, or consumed.

Price Floor

A government- or authority-imposed minimum price that can be charged for a good or service, intended to prevent prices from falling too low.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers matches the quantity supplied by producers, resulting in no surplus or shortage.

Market Price

The actual selling price of a good or service in the market at which it can be bought or sold.

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