Describe the channels through which an open market purchase of bonds by the Fed affects output in a closed economy
What will be an ideal response?
An open market purchase of bonds by the Fed leads to a rightward shift in the money supply. As a result, interest rates decrease, which in turn increases investment. The higher levels of investment translate into higher output levels.
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A study of consumers' attitudes toward labor standards for the products they buy revealed that consumers:
a. just do not care. b. would completely change their buying patterns and want to be 100% sure that products they buy are made in foreign factories with good working conditions. c. would pay a slight premium to ensure good working conditions. d. are more concerned about the prices they pay than working conditions overseas.
The demand for money schedule shows the ________ relationship between money demand and the nominal interest rate which means that as the ________
A) negative; opportunity cost of holding money increases, the nominal interest rate increases B) negative; nominal interest rate increases, the opportunity cost of holding money increases C) positive; nominal interest rate increases, the opportunity cost of holding money increases D) positive; nominal interest rate increases, the opportunity cost of holding money decreases E) negative; nominal interest rate increases, the opportunity cost of holding money decreases