When the Fed sells short-term bonds and buys long-term bonds, it is engaging in

If households in the economy decide to take money out of checking account deposits and hold it as currency, this will initially

A) decrease M1 and not change M2. B) not change M1 and not change M2. C) not change M1 and increase M2. D) decrease M1 and decrease M2.

Keynesian economists argue that monetary policy works through its effects on:

a. interest rates and investment. b. price- and wage-flexibility. c. budget deficits and trade deficits. d. the spending and money multipliers.