Explain in Detail What Effect a Fed Purchase of Bonds

question 67

Essay

Explain in detail what effect a Fed purchase of bonds will have on: (1)the LM curve; and (2)the IS curve.

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Definitions:

Accretion Expense

Accretion expense relates to the gradual increase in the liability amount in an accretion bond or the process of asset value increase over time.

Operating Item

Expenses or revenues that arise from the primary operations of a company.

Asset Retirement Obligation

A legal obligation associated with the retirement of a tangible long-lived asset, where the liability is recognized in the period in which it incurs.

Indefinite-Lived Intangible

Non-physical assets without a fixed life and which do not amortize, such as trademarks or brand names, that have potential value as long as they are used by the company.