Other things being equal, when the Fed buys U.S. government securities
A. the quantity of deposits in the U.S. banking system expands by less than the amount of the Fed's purchase.
B. the Fed's total assets and total liabilities immediately expand by exactly the amount of the Fed's purchase.
C. the U.S. Treasury must immediately issue new securities to replace the securities that the Fed has removed from the market.
D. the quantity of paper currency and coins in circulation expands by more than the amount of the Fed's purchase.
Answer: B
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What will be an ideal response?
In the monetarist view, if there is an increase in money growth then
a. the money supply and inflation will grow proportionally, with no effect on output and employment. b. the money supply grows faster than the inflation rate, with unfavorable effects on output and employment. c. the money supply grows faster than the inflation rate, leading to an increase in output and employment in the short-run. d. there will be no effect on output, employment, or inflation, in the long-run. e. both c and d.