Graphically illustrate and explain what effect a sale of bonds by the Federal Reserve will have on the money market
What will be an ideal response?
A Fed purchase of bonds will cause a decrease in H and an decrease in the money supply. At the initial interest rate, there will be an excess demand for money. The interest rate will increase to restore money market equilibrium. All else fixed, there will be no change in money demand.
You might also like to view...
How can economists be confident that the pill itself is responsible for the increases in female labor force participation?
A. States that legalized the pill earlier also had earlier increases in female labor force participation. B. Starting from 1960, the year the pill was approved for sale, female labor force participation has been rising. C. States that legalized different versions of the pill had different patterns of female labor force participation. D. It seems to be common sense that delaying childbearing would increase labor force participation.
Assuming the market of soda has a regular downward sloping demand curve and upward sloping supply curve, the tax will ________ the price paid by buyers and ________ the price received by sellers
A) decrease; increase B) decrease; decrease C) increase; increase D) increase; decrease